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Walmart: Home Benefiting from Sourcing Deal and Consolidation

Walmart’s alliance with Li & Fung, which shifts a portion of the sourcing responsibility and manpower off Walmart’s plate, is already showing “early benefits,” according to the company.

In addition, the home business is getting a lift from the retailer reducing its vendor roster and cutting back on inventory skus, according to Eduardo Castro-Wright, vice chairman, Wal-Mart Stores Inc.

“Global sourcing will be the anchor for cost of goods sold reduction and margin enhancement, while giving us a competitive advantage to further reduce prices,” he explained in remarks about the company’s fourth quarter and fiscal year results. “For example, in home, supplier rationalization and consolidation in bedding programs led to margin gains on items where we were already very competitive on price. Consolidating production with strategically aligned suppliers led to significant cost savings and margin improvement in several home programs. We achieved a combined cost of goods sold savings of 7.2% in bedding during the fourth quarter.”

Other aspects of home for the quarter that were also strong included “any product related to eating and entertaining at home, while sales of more discretionary items were softer than last year’s fourth quarter,” Castro-Wright said.

While admittedly “still in the early stages” of its global sourcing efforts, Walmart has “kicked into high gear” the leveraging of its size and global footprint to reduce the cost of goods it imports into retail markets around the world. The core of the strategy, Castro-Wright explained, is to increase direct sourcing for the company’s private brands, which represent more than $100 billion at cost.

The company’s organization is also part of this effort. “We are redefining roles and responsibilities within our global organization, and we are excited about the opportunity to accelerate the growth of Walmart’s multi-channel initiatives around the world,” he said.

“Customers will be able to experience the brand where ever and whenever they want. I will share more on this opportunity in the near future,” he added.

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