DALLAS — Wal-Mart shoppers, who number 140 million every week in the U.S. alone, are feeling economic pressure, said Duncan Mac Naughton, chief merchandising and marketing officer of Wal-Mart Stores U.S., speaking at the Texas A&M Retailing Summit here.
This story first appeared in the October 14, 2013 issue of WWD. Subscribe Today.
“Folks are very tentative today — there’s not any really good news,” he said.
With an average household income of $40,000 or less, Wal-Mart’s customer feels the squeeze of underemployment, which he estimated is in the low teens; gas prices above $3 a gallon, this year’s increase in payroll taxes, and the imminent decrease in SNAP benefits that takes effect Nov. 1.
“The good news is we feel we are very prepared regardless of the economic conditions of the U.S.,” he said.
With 4,100 stores in three formats and nearly $275 billion in revenue last year, the U.S. division of Wal-Mart is working to pare prices to the bone by reducing the costs of everything — “how we load our trucks, how we stock our shelves, how we check people out of the store, how we buy, how we source products, how we negotiate with our supplier partners,” he said.
“We need to lead in price and we watch it everyday,” Mac Naughton said.
In apparel, its focus is basics — 50 percent of sales are jeans, socks, underwear and T-shirts; 40 percent are “fashion basics,” which he jokingly described as “a shirt with a stripe,” and 10 percent are trend.
“Our customer comes to us for fundamental needs in apparel and home,” he said. “We keep to that 50-40-10 formula and we get in less trouble.”
Wal-Mart is realizing good results from this year’s introductions of Ben Hogan golf shirts, Avia sneakers that “single-handedly turned around our shoe department,” Rachael Ray housewares, and men’s activewear by And 1 and Russell, Mac Naughton noted.
“Our activewear business is quite strong,” he said.
The company is ramping up digital media efforts and began posting on Instagram in August. It has 34 million Facebook fans and pushes content through YouTube and Twitter.
The audience applauded when Mac Naughton noted that the company had hired more than 13,000 veterans since Memorial Day, when it guaranteed jobs to all service members with honorable discharges.
Successes in this year’s initiative to source more product in the U.S. include Kayser-Roth underwear and socks, Made Here towels by 1888 Mills and Element televisions, he said.
In another presentation at the conference, Jim Gold, president of specialty retail at Neiman Marcus, was asked which designers impress him.
“It doesn’t matter what age, what country, everyone wants a piece of Chanel and Hermès, more so today than ever before,” Gold responded. He also credited Brunello Cucinelli for becoming one of Neiman’s biggest apparel brands “overnight,” and called Van Cleef & Arpels “the most impressive jewelry company today.”
Moncler, though relatively new to the retailer, is “best of class in the outerwear space,” he said, and Azzedine Alaïa “may be the greatest sportswear designer of our time.”
Gold also praised Tom Ford for quickly racing to “neck and neck with Chanel for the biggest beauty business” and becoming one of the chain’s most successful labels in sunglasses and men’s wear.