Wal-Mart loves to cut costs. They have decided to use more part-time employees, in all probability to save costs of full-time worker benefits.
Wal-Mart Stores Inc. (NYSE:WMT) might want to take another approach though. With same-store sales figures revised down for September, it would appear that at 1.3% same-store growth, the company's U.S. operations are now growing less than the rate of inflation.
Wal-Mart has 3,800 stores in the U.S. Even with the company's effort to spiff up its offerings with more expensive clothing and electronics, the plan does not seem to be working.
A moderation in same-store sales is sometimes a sign that a retailer has too many stores or that some of the stores are too close to one another. Wal-Mart may have reached that point of saturation, at least in some regions. Same-store sales were not just poor in September. They have been below Target Corp.'s (NYSE: TGT) figures and that trend continues. To compare, Target's same-store sales rose 6.7% in September.
Shutting a few dozen stores may be the only solution to Wal-Mart's same-store sales growth problem.
Douglas McIntyre is a partner at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
10-05-2006 @ 8:52PM
Shawn Mc said...
Why would Wal-Mart want to close stores? Would you really want to close stores that, in all honesty, do over $80 to $100 million in sales revenue? Maybe the problem lies in the mgt strategies, not in the expansion.
10-06-2006 @ 12:13AM
Moni said...
I can only pray to the deity of your choice that the cinder brick temple of sadness and low self esteem which haunts the edge of our hood closes it doors, and where it once stained the earth, my neighbors and friends, rather than the Walton family, will have a chance too, at harvesting the fruits of OUR American dreams.
10-06-2006 @ 4:06AM
Ian said...
Shutting down stores is the least of Wal-Marts concerns I feel. Pay for part time workers at a minimum wage, avoid benefits, expanding to much. Yes, more stores add more jobs, but at what cost to the people. Those are a few things that help put more and more people under the poverty line in this nation. How can we ever achieve the American dream. It's not saving for a better future, it's saving for a poorer one.
10-06-2006 @ 1:50PM
T. King said...
We live in the age of "Wal-Mart-Virtue". The prevailing paradigm, simply stated, is this:
"We do not seek to be the best, only to suck a little bit less than the next guy.
And this way, through the use of intimidation, fear and rampant paranoia, we will pursue mediocrity in everything we do. Here at Wal-Mart, we don't create misery, we only capitalise on it."
10-07-2006 @ 4:57AM
David said...
It does seem a bit contradictory: bulk up on part time help yet try to get more "high dollar" customers in the store. I missed out on getting my Harvard MBA but it seems to me that customers who have more money to spend buying higher priced merchandise may expect a higher level of service with the sale, yet current policies seem directly at odds with that.
What seems to be hurting the company right now is the policies they've put into place are running off the long time help, yet they continue to build new stores - there's no "knowledge base" of existing long-term associates to share the culture and know-how. Just pausing the current tempo of growth would probably help a great deal as the new associates at the new stores would gain real world experience then have a chance to move up or move to other stores, taking their knowledge and experience with them.
As it stands right now, the long term associates are taking their knowledge and experience to other retailers as they leave Wal-Mart in droves. (look at the sales numbers again...who is growing and who is stagnant?)