July 23, 2007
BENTONVILLE, Ark. - Wal-Mart Stores Inc., the world’s largest retailer, said Monday it is cutting prices on more than 16,000 items starting this week in a bid to turn around sales for the critical back-to-school season.
The price cuts, which range from 10 percent to 50 percent, will be backed by a new ad campaign on how to save money as gas prices remain high and kids head back to school. The cuts are deeper and involve even more items than in the year-ago period and top the 11,000 items discounted right before last year’s holiday season kicked off, according to Melissa O’Brien, a company spokeswoman.
Wal-Mart has been playing up its low prices since late last year after getting hurt by a focus on trendy merchandise in an effort to get affluent customers to buy more than just groceries. While the upscale strategy worked in electronics,such as $1,000 flat-panel TVs, it failed in home furnishings and apparel, resulting in sluggish sales since last fall.
So far this fiscal year, Wal-Mart has averaged a same-store sales gain of a meager 1 percent, compared to rival Target Corp.’s 4.1 percent increase, according to Thomson First Call.
Same-store sales are sales at stores open at least a year and are considered a key indicator of a retailer’s health.
In April, Wal-Mart’s same-store sales dropped — the weakest performance since it began publishing monthly sales in 1980.
Last year, Wal-Mart’s same-store sales averaged a 2.1 percent increase, while Target had a 4.9 percent increase.
Wal-Mart did enjoy some improvement last month when it posted a better-than-expected same-store sales gain of 2.4 percent, indicating that its more aggressive discount strategy may be resonating with shoppers.
“We’ll provide families savings where it counts, and continue to work closely with key suppliers, reduce packaging and lower shipping costs as we steer this program through fall and beyond,” Bill Simon, chief operating officer, Wal-Mart Stores U.S., said in a statement.
Under Wal-Mart’s new pricing plan, $1 will be able to buy 4 wide ruled notebooks, 2 bottles Elmer’s glue (4 oz.) and a 24-pack of crayons. A $50 budget will be able to purchase a week’s worth of school clothes, and $80 will buy two pair of prescription glasses at the Wal-Mart Vision Center.
The price cutting campaign comes as Wal-Mart has also been making changes to its merchandising team. The company said on Friday that Claire Watts, a top Wal-Mart apparel merchant, has resigned. The executive had been behind the failed makeover to trendy items from low-price basics.
As part of the changes, Wal-Mart promoted Dottie Mattison, formerly chief merchant for Walmart.com, to senior vice president overseeing women’s apparel, jewelry, shoes and accessories as well as product development. Mattison will be based in the company’s trend office in New York City.
Shares of key retailers such as Sears Holding Corp. and J.C. Penney Co. were down, as investors worried about how ensuing price wars would affect profit margins. Wal-Mart rose 5 cents to close at $48.11.