The Bentonville-based behemoth has collected a string of superlatives in five decades. It’s the world’s biggest retailer with revenues of $444 billion in the fiscal year ended Jan. 31, and the nation’s biggest private employer with 2 million workers in the U.S. Wal-Mart Stores Inc. recently surpassed the 10,000-store mark worldwide with a unit that opened in Mexico.
The company’s 2011 revenue was bigger than the gross domestic product of Norway. So great is its influence that some economists consider it a proxy for consumer behavior. With 200 million shoppers visiting Wal-Mart every week, the retailer has argued that its sales performance reflects consumers’ economic condition. RELATED STORY: The Biggest Box: Wal-Mart By the Numbers >>
Now it faces the challenge of how to maintain its dominance as its U.S. expansion slows, overseas markets remain tricky, and the expansion of Internet giants like Amazon.com threaten Wal-Mart — all while being cast as the equivalent of the Big Bad Wolf when it comes to retailing.
“Wal-Mart grew up with the Baby Boomers,” said Robin Sherk, senior analyst at Kantar. “Is this going to be the format of Gen-Y? Is the Wal-Mart proposition as relevant to them?”
The recession and its impact on Wal-Mart’s core shoppers led the company to create its famous tag line, “We save people money so they can live better,” a variant on its pioneering Every Day Low Pricing, or EDLP, strategy. While higher income consumers have recovered a bit, Wal-Mart has said shoppers haven’t increased their spending so the retailer has been investing in Every Day Low Pricing to encourage customers to spend.
“Nothing builds more loyalty with customers than everyday low prices,” said Mike Duke, chief executive officer of Wal-Mart, on a recent earnings call. “We offer everyday low prices in every market. No exceptions. No excuses.”
Duke highlighted the company’s success over the past several quarters in leveraging expenses, but said there are still places where Wal-Mart can save money: “No one controls costs better than Wal-Mart because we do it for the right reason. It’s all for the customer.”
Wal-Mart in the fourth quarter ended Jan. 31 delivered its second consecutive period of positive comp-store sales with a 1.5 percent gain. However, Wal-Mart was hampered by poor apparel sales and its investment in EDLP.
The retailer, which replaced Woolworth on the Dow Jones Industrial Average in 1997, said earnings totaled $1.44 a share in the quarter compared to $1.50 in the previous year’s quarter, and were 2 cents below Wall Street expectations. Wal-Mart this year expects profits from continuing operations to rise to $4.72 to $4.92 a diluted share — a range that shows growth from last year’s $4.54, but also opens up a potential shortfall, given the $4.90 analysts had penciled in. Sam’s Club posted a 5.4 percent comp increase for the quarter. Comps for the 13-week period ending April 27 are expected to be flat or up 2 percent. Net sales are forecast to grow 5 to 7 percent, or $22 billion to $31 billion, in 2013.
“We’ve seen the unemployment numbers come down a little bit, and that’s really good, but that hasn’t stopped consumers’ spending paycheck-to-paycheck,” Charles M. Holley Jr., Wal-Mart’s chief financial officer, said when the retailer reported its fourth-quarter results in February.
The Wal-Mart consumers, whose average income is $30,000 to $60,000 a year, are most concerned about rising fuel, energy and food prices, said David Tovar, a Wal-Mart spokesman. “In the U.S., we’re also seeing changes by reducing internal costs,” he said. “We’re starting to widen the gap in terms of EDLP with the competition, and we saw a positive traffic increase in the fourth quarter.”
“There has been margin erosion with Wal-Mart’s investments in price,” said Sherk of Kantar. “Wal-Mart is trying to squeeze more and more out of its productivity loop. But do shoppers really care about shelf prices when they can get coupons and loyalty cards from other retailers?”
Apparel has been Wal-Mart’s Achilles’ heel, but the retailer may be taking another stab at it. When Wal-Mart in October 2011 closed its New York fashion office, the company said that its emphasis would be on basics. However, basic socks don’t have very high margins and Wal-Mart has been both emphasizing national brands more and adding more opening price points. “They’re going after both consumers,” said Sherk. “There’s a great emphasis on assortment and breadth of assortment.”
Hiking the fashion component, however, has been a struggle for the giant. In 2006, then-chairman H. Lee Scott told Wall Street analysts the company must “get better at fashion basics, not what I would call high fashion. There’s a tremendous opportunity without stepping out to the next level, which is so dangerous for anyone to get into unless you’re a high fashion company.”
Since then, its attempts to bring trendy styles and star labels have met with mixed results. The Miley Cyrus and Max Azria collection foundered. George was tweaked and reinvented multiple times in the U.S. even as it remained a star performer in its native U.K. Norma Kamali’s three-year deal with Wal-Mart ended in November.
Wal-Mart knows that if it is to survive and thrive for another 50 years, it must become the predominant force in e-commerce and advance with mobile and digital technology. The retailer in April 2011 bought Kosmix, a company known for its social media genome capabilities, for $300 million and formed @walmartlabs. Since then, Wal-Mart has acquired OnRiot and Grabber, introduced Shopycat for Facebook and launched Ultraviolet, a movie-streaming service. The retailer is said to be developing a mobile payment system more advanced than Google Wallet.
“I’m really stunned by the amount of progress Wal-Mart has made in term of technology this year and its nimbleness,” said Carol Spieckerman, president of newmarketbuilders. “Wal-Mart is exploring social shopping and the leading edge of where retail should go. The next wave for Wal-Mart is encouraging. Very much like Amazon, Wal-Mart is starting to think of itself more as a platform than simply as a traditional retailer.”
Spieckerman believes Wal-Mart can parlay entertainment launches such as “Twilight” and Justin Bieber into limited-time events with exclusive products.
“Wal-Mart has an opportunity to improve its apparel business and leverage its multiplatform marketing capabilities,” she said. Wal-Mart is bullish on its site-to-store program, which makes up 50 percent of its e-commerce business. Pick-Up-Today gives customers the flexibility of placing an order and picking up their purchase the same day.
London’s newly opened @designmuseum will look back on the life and work of Azzedine Alaïa in a show that the designer helped to curate before he died of heart failure last month. The retrospective, which Alaïa had worked on with Mark Wilson, chief curator of the @groningermuseum, will look at the impact of his work worldwide. The show, “Azzedine Alaïa: The Couturier,” will run from May 10 to October 7. Read more about the exhibit on WWD.com #wwdnews #wwdfashion (📷: @zefashioninsider)
@Pharrell and his wife Helen Lasichanh were among the stars that came out to celebrate @rimowa’s first pop-up concept shop. The space, which is located on Rodeo Drive in Beverly Hills, draws inspiration from airport luggage carousels and lounge areas – and features the company’s luggage and accessories. If the pop-up is successful it could pave the way for addition temporary shops throughout the world. #wwdfashion (📷: Owen Kolasinski/BFA)
@carineroitfeld celebrated @crfashionbook’s first calendar last night with a dinner party at Spring Place in Manhattan. Photographed by @stevenkleinstudio, the calendar takes on a fitness theme and features @joansmalls, @gigihadid, @danielle_herrington_ – pictured here – and more. “[Carine Roitfeld] wanted me to feel sexy and she wanted me to be myself and feel it out on my own and do what I felt was right,” said Herrington, aka Miss October. #wwdeye
@saintrecords and @virgilabloh last night at @americanexpress’ “A Night With Success Makers” event. “I always bring it back to community because without that I wouldn’t have the courage,” said Knowles when asked how she has gotten where she is now. Read more highlights from their conversation on WWD.com. #wwdeye (📷: @lizdoupnik)
This Just In: Industry sources have told WWD that Anastasia Soare is rumored to be considering selling her beauty business, @anastasiabeverlyhills. According to those sources, Soare has tapped investment bank Imperial Capital to explore sale options for her eponymous beauty brand –– and with at least $340 million in net sales, this would be a big deal. Put in context of other recent transactions for makeup companies, Soare’s price tag could be in the billions if she were to sell the whole thing. #wwdnews #wwdbeauty (📷: @clint_spaulding)
@assouline’s latest book, “The Spirit of Bentley: Be Extraordinary” captures the adventurous attitudes and opulent lifestyles of @bentleymotors’ most creative owners and enthusiasts throughout the U.K. The 292-page hardcover has a section dedicated to showing its team of skilled artisans and photos of its most colorful owners, from George Bamford to designer @alicetemperley, pictured here by Aline Coquelle. #wwdeye
@google released its report on the most popular search terms this year. For fashion brands, the list was led by @gucci, the luxury brand that stunned the market last October when it pledged to stop using fur. Runner ups were @supremenewyork and @fashionnova, along with more established brands like @louisvuitton, @chanelofficial and @ysl. #wwdfashion (📷: @aitorrosasphoto)
In yet another fashion show shuffle, @elleryland is moving its show in sync with the Paris couture calendar — though the brand is still keeping one foot on the city’s ready-to-wear schedule. Their runway show in January will coincide with the launch of a new strategy: designing two main collections each year instead of four, which will then be released in four drops. “As we all know, the system needs to change. We need to show sooner to give time back to artisans and designers to do what they do best — create,” said founder Kym Ellery. #wwdnews #wwdfashion (📷: @kukukuba)
@maxmara’s classic 101801 coat was the cornerstone of its pre-fall 2018 collection. The design team expanded the traditional double-breasted, kimono-sleeved style into a trapeze coat, lean belted styles and a peacoat and presented them in monochromatic looks – like the camel one pictured here. #wwdfashion #prefall18 (📷: George Chinsee)