WAL-MART REEVALUATES ITS APPAREL STRATEGY: WILL PUSH FOR BRANDS
Byline: Nancy Brumback
CHICAGO — In a move that could have a profound impact on mass merchandising, Wal-Mart Stores said Wednesday it is actively seeking name brand apparel lines.
The news could mean that Wal-Mart, which is expecting a $16 billion increase in sales this year and is a potential powerhouse in the apparel business, is reevaluating its clothing strategy.
Donald Soderquist, vice chairman and chief operating officer — speaking at the Point-of-Purchase
Advertising Institute’s convention here — predicted the retailer’s sales will increase to $83 billion this year, with profits up $300 million over last year. The retailer’s 1993 sales were $67.3 billion, and profits were $2.3 billion.
The sales estimate is on target with many analysts’ projections, although the earnings estimate is slightly lower.
Still, Soderquist said, “No other company in the world has ever added $16 billion in sales in one year.”
He added that Wal-Mart’s growth over the last few years “still blows our minds a little” at the retailer’s Bentonville, Ark., headquarters.
Name brands are a key part of that growth, said Soderquist, adding, “In the past, it’s been difficult for us to get name brands in apparel, but we’re getting them now.”
Wal-Mart’s most recent branded apparel addition, White Stag, “is going gangbusters.”
“We’re looking for more. We like to shout name brands in our stores,” he said after the meeting. The discount chain is also continuing a program to upgrade its cosmetics sections, he added.
“Wal-Mart is a name-brand company,” despite its introduction of private label lines, Soderquist assured the audience, made up primarily of branded manufacturers and advertising executives.
“We will continue to advertise, promote and feature name brands. We believe our private or controlled labels supplement name brands” with lower prices, though the retailer seeks to maintain high quality levels in its private label lines, he said.
Wal-Mart has been a dominant player in hard goods, but as industry observers have often said, its efforts have not been concentrated in apparel. The company has said in the past that its focus for growth is with the supercenter formats, which combine a general merchandise store with a full-line grocery store.
By increasing the number of branded clothing lines it carries, the retailer could be trying to establish a greater presence in apparel, which generally carries a higher margin than hard goods. This strategy is similar to that of many competing discounters — notably Target and Kmart — that have upgraded apparel assortments in recent years.
Wal-Mart is also actively exploring international locations for its retail formats. As reported, it is taking its Sam’s wholesale clubs and Wal-Mart Supercenters to foreign markets, including Mexico, Canada, Brazil, Argentina, Hong Kong and China. It is also starting to look at opportunities in Europe.
“We’re testing international markets and learning what we can. It’s part of Wal-Mart’s experimenting process,” Soderquist said.
He added that supercenters and clubs are the formats being exported.
“We’re not planning any [traditional] Wal-Marts in those markets at this point,” he said.
In Mexico, thanks to a joint venture with Mexico’s largest retailer, Cifra, “we figure we are seven to eight years ahead of where we would have been trying to go in alone,” Soderquist said.
Wal-Mart operates 47 stores in Mexico through the joint venture, including 18 Sam’s Clubs and six Wal-Mart Supercenters. It plans to add 10 to 12 clubs and 10 to 12 supercenters by January 1996, Soderquist said.
The stores originally carried about 40 percent U.S.-made goods and 60 percent Mexican goods, he said. “We learned quickly what the people wanted was U.S. goods,” he added. “Now our clubs carry 70 to 80 percent U.S. goods.”
In Canada, Wal-Mart plans to add seven stores next year. The company is in the process of remerchandising the 122 Woolco stores it purchased from Woolworth Corp., increasing the number of sku’s from 30,000 to 70,000.
As reported, the company plans to open several stores in Brazil and in Argentina next year.
Four mini-clubs — between 10,000 and 20,000 square feet, with about 1,000 sku’s — will open in Hong Kong by the end of this year. Two full-size warehouse clubs are slated for China, in Shenzhen and Shanghai, in fall 1995. In Asia, the stores are called Value Clubs, a name Wal-Mart does not use in the U.S.
Wal-Mart’s domestic expansion is also on track. The largest part of the discount store growth is in the Northeast and in California, Oregon and Washington, while supercenter growth is aimed at the country’s midsection.
Wal-Mart plans 100 new discount stores and 100 supercenters in the U.S.
— Fairchild News Service