By  on July 2, 2010

The impending departure of Wal-Mart U.S. chief merchant John Fleminggives Wal-Mart Stores Inc. a chance to remake the country’s largestapparel business — and Wall Street hopes the world’s largest retailertakes advantage of it.

Fleming, a former Target Corp. departmentstore executive who has spent the last decade at Wal-Mart, will stepdown as executive vice president and chief merchandising officer of theretail giant’s namesake division on Aug. 1. His resignation is thesecond departure of a top executive at the U.S. stores unit, perhaps anindication top management is becoming impatient with the division’sperformance.

The company said Fleming was leaving to spend moretime with his family, but some Wall Street analysts were skeptical,viewing the departure at least partially due to weakness in thecompany’s sales — domestic same-store sales have been flat for the pastfour quarters — and the ascension of Bill Simon to chief executiveofficer of the U.S. division. Simon took the reins last week fromEduardo Castro-Wright, who remains vice chairman of the company andbecomes president and ceo of and Global Sourcing. Wal-Marthad attributed Castro-Wright’s shift, which entails relocating toCalifornia from Arkansas, to his wife’s recovery from heart surgery.

AWal-Mart spokesman said Fleming was bound by the company’s standardtwo-year noncompete agreement. John Westling, executive vice presidentof planning, pricing and replenishment, will assume Fleming’sresponsibility for apparel until a successor is named. Jack Sinclair,executive vice president and general manager of grocery, will assumetemporary oversight of food and the health and wellness unit.

Wal-Mart’sU.S. sales rose 1.1 percent last year, to $258.2 billion, butsame-store sales retreated 0.7 percent. Grocery’s share of revenues roseto 51 percent, or about $131.7 billion, from 49 percent in 2008, whileapparel’s share fell to 10 percent, or about $25.8 billion, from 11percent.

Whether Fleming jumped or was pushed, analysts wantWal-Mart to take advantage of the opportunity and update the retailer’sapparel offerings, which have been panned as too fashion forward attimes and too basic at others.

“They need to bring ‘wow’ back tothe assortment,” said Brian Sozzi, analyst at Wall Street StrategiesInc., referring to the company’s apparel and food offerings.

“Theyneed to slowly bring in more fashion pieces, test product by market,localize content,” he said. “If Macy’s can do it, certainly Wal-Mart cando it.”

Sozzi said Fleming missed an opportunity about a yearago to introduce some higher-quality goods and go after the rebound indiscretionary spending.

J.P. Morgan analyst Charles Grom saidFleming’s move “is a net positive as we look for Wal-Mart to take afresh look at its current merchandising-marketing strategy, which,frankly, needs a major overhaul in light of declining traffic and salestrends.…Recall that Wal-Mart’s apparel strategy and move to [New YorkCity] have been largely unsuccessful.”

Part of Wal-Mart’sfashion conundrum is that the overall pricing image of the store doesnot lend itself naturally to trendier apparel. “Wal-Mart is strugglingwith apparel, has been struggling, will be struggling with apparelbecause most people regard it as a hard-lines discount store and don’tsee it as a fashion store,” said consultant Walter Loeb.

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