By David Moin
NEW YORK — Wal-Mart a fashion house? Not in the eyes of its chief executive. It’s more like the same house putting up a second story.
Lately, Wal-Mart has been getting recognition for its apparel upgrades, and there’s anticipation over the slow rollout of its trend-right, and pricier, George collection in the U.S. and internationally. But according to Lee Scott, Wal-Mart Stores Inc. president and ceo: “We don’t want to be a fashion house. We couldn’t be a fashion house. But we could have a more consistent quality level.”
Nor does Wal-Mart hope to bring in a new customer or a more affluent one via its apparel push, Scott explained during his presentation Thursday at the Goldman Sachs Global Retail Conference at The Plaza here: “We don’t want to change the customer base. We want to better serve the customer base we have. Look at Wal-Mart like a house in some ways, as if we are adding a second level to the same house.”
The George line was launched by the U.K. food retailer Asda, which Wal-Mart acquired in 1998. George now has sales of more than $1 billion annually. This year, the George collection is gradually appearing at Wal-Marts in the U.S., though Scott acknowledged the label may be a bit of a culture shock to its shoppers. Nevertheless, “the George line continues to do well. We now have it in Germany,” even though Wal-Mart’s stores in that country have been struggling, primarily with general merchandise.
In some cases, Scott suggested, the George styling may be a little too forward for the Wal-Mart customer, but that’s because Wal-Mart has trained consumers to expect a certain level of style and quality from the apparel category. “We’ve got to get the George apparel out on the edge of our red carpets,” for maximum visibility and to acclimate the shoppers and strengthen the Wal-Mart fashion and brand image. “It’s not exotic,” Scott said. “I realize it’s not Nike. It’s not Prada. It is a great brand.”
Discussing the challenges facing the world’s largest company, Scott said developing people for the stores and management is “a huge challenge.” Another one is sustaining growth and comp gains. Asked whether Wal-Mart Supercenters could sustain long-term growth and continued comp gains, Scott replied: “If we keep them fresh, keep the merchandise updated, the Supercenters will be able to serve communities for a long time.” He also said the company could drop two or three Supercenters in certain communities, and that financial services in five to 10 years could be meaningful for customers. However, he added, “I don’t know how meaningful it will be to our shareholders,” referring to the overall impact on the retailer’s revenues.
Discussing business and the economy, Scott said, “Sales will continue at about the current rate” and he projected September comp-store sales gains at 4 to 6 percent. “The economy isn’t going to fall apart nor do I get a sense that it’s going to start booming.” [For more on Wal-Mart’s sales in August, as well as other retailers, see above story.]
He also said he’s been getting “mixed signals” on the economy and that rising fuel prices and utility costs “really hit Wal-Mart customers, 27 percent of which don’t use a bank or have checking accounts.” Still, he said “for anything new in the stores, such as $186 DVD/VHS machines, or the newest top at $6 or $16, the customer has money to react…It’s not so much a liquidity issue. It’s more of a confidence issue.”
Discussing the global economy, Scott said results in Canada have been “absolutely outstanding,” with first half comps in the double digits, with growth in home, hardlines and apparel. The U.K. is performing very much the same way, he said.
For the $220 billion company, operating with 3,335 stores in the U.S. and 1,212 abroad, “size brings with it naturally a significant number of negatives.” However, “We don’t spend time thinking about how big we are. We still spend time talking about an individual store, an individual club, an individual manager,” Scott said.