By  on May 2, 2007

Apparel is a linchpin of Wal-Mart's merchandising strategy to customize stores in communities, a top company executive said Tuesday.

"Store of the community starts with apparel,'' Wal-Mart treasurer Charles Holley told analysts at a retail conference sponsored by Lehman Bros. "We've got to get it right. You'll see us be much more driven into basics, but basics that are right for the community."

Store of the community, which calls for tailoring assortments based on geography and demographics, has been a long-term business strategy for the $345 billion retailer. Wal-Mart believes that customized assortments translate into stronger customer loyalty, less inventory and bigger profit margins.

After a rocky year in which its assortment became too trendy, Wal-Mart is pulling the contemporary Metro 7 line from about 800 stores, or a little more than half its current base. Holley said George, the misses' brand, also had a tough year in 2006, but the retailer still believes in the label's wide appeal.

"You'll see a lot of change in George this summer and into the back half of the year," he said. Wal-Mart will remodel 350 apparel departments this year, in addition to the 790 redone last year.

"It will take us some time to get stores where we want to go," Holley said.

He also made these points:

l Wal-Mart plans to become partners with community hospitals to operate in-store health clinics and drive traffic to stores. The retailer has 76 such clinics and will boost that to 400 in the next three years. "It could be as many as 2,000 after that," Holley said.

-- Sam's Club will increase focus on affordable luxury, women shoppers and Baby Boomers.

-- Centralizing distribution at Seiyu, Wal-Mart's Japanese subsidiary, should help make that business profitable.

-- Wal-Mart's store size of choice is now 178,000 square feet, compared with 195,000 square feet two years ago.

-- Radio frequency identification inventory tracking will be expanded to 400 stores.

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