Wal-Mart to take rollbacks "to whole new level" in 2010

Bentonville, Ark. - A week after embarking on one of its most aggressive price cutting efforts that focused mainly on specific consumable products pre-Memorial Day weekend, Wal-Mart said it would continue slashing prices, but "to a whole new level," in the new 2010 fiscal year.

During his presentation at the Wal-Mart 40th annual shareholders' meeting here last week, Eduardo Castro-Wright, vice chairman of Wal-Marts Stores Inc., emphasized the retailer's renewed emphasis on pricing as a means of improving recently hampered traffic and sales trends at its U.S. stores.

"I know in my heart that our mission has never been as important as it is today," he said to a crowd of more than 16,000 attendees here as well as online viewers. 

Castro-Wright explained that escalating gas prices and unemployment are impacting "how much our customers have to spend. And at the same time, the competition for their dollars is stiffer than ever. These external headwinds are real, and they have contributed to smaller traffic and sales in our stores over the last couple of quarters."
To overcome these hurdles, Wal-Mart is turning to deeper price cuts.

"Because of all of the emphasis we've put on rollbacks, we want to make sure our customers know this," Castro-Wright said. "So we have taken our promotional activity to a whole new level and have introduced even more new rollbacks. We even have Mr. Rollback nowadays."

He added that "everyday price leadership" combined with appropriately stocked stores are "the way to grow and it is the way to win the loyalty of our customers."

"We have been listening to what [shoppers] have to say and they've told us they cannot find sometimes all of the products that they need in their local stores," Castro-Wright continued. "So we have fine-tuned out merchandising strategy and we continue to do that to make sure that we have all of the products they are looking for."

Later in the morning, Wal-Mart Stores Inc.'s president and ceo Mike Duke reiterated the message.
"We really need to turn the productivity loop - deliver on our everyday low price business model everywhere," he said. "Wal-Mart must widen the price gap."

Another important topic at the shareholders' meeting was sustainability. Wal-Mart said it is "committed to reduce 20 million metric tons of greenhouse gas emissions in our supply chain by the end of 2015. 

Also during the meeting, Wal-Mart's board of directors approved a new repurchase program that authorizes the company to repurchase $15 billion of its shares. This program replaces the previous $15 billion program, which was announced June 5, 2009, and had approximately $4.7 billion of remaining authorization. Under the program, repurchased shares are constructively retired and returned to unissued status.


Speaking to financial analysts after the meeting was over, executives expounded on similar themes across the main divisions - Walmart U.S., Sam's Club, and Walmart International: price rollbacks, merchandise tuned market by market, improved in-store and online consumer shopping experience. Other issues with a corporate-wide impact were the ramp-up of global sourcing, rooting out profit-sapping skus, and looming opportunities with strategic partners such as non-retail brands and major telecommunications companies.

Price competition is not necessarily the cure-all, Castro-Wright pointed out. In the question-and-answer segment, for example, he said home is a department where in several categories, "Price is not going to drive growth in those categories - quality is."

The executive team emphasized that improved product quality is being addressed both in dealings with vendors and through the company's global sourcing program. Both areas are expected to generate cost savings as well - but those may be less likely to turn into net profit and more often passed along directly to consumers, as macro-economic conditions keep their price sensitivity razor-sharp and keep retail competitors fierce.


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