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The Honolulu Advertiser
Posted on: Saturday, February 25, 2006

Wal-Mart going trendier to maintain growth

By Marcus Kabel
Associated Press

With 3,900 stores across America, Wal-Mart is hoping that sales growth will come less from new stores and more from fancier products and nicer stores that will attract more high-income customers.


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BENTONVILLE, Ark. After watching its sales momentum surge over the past four decades, Wal-Mart Stores Inc. now finds it has to work harder to grow with 3,900 stores nearly saturating the U.S. market, it's the company's sales strategy, not new retail outlets, that will determine Wal-Mart's future.

Analysts are optimistic the nation's largest retailer will get the job done even if the company isn't so sure itself. Wal-Mart is offering a broader selection of high-end items and sprucing up its stores to make happier customers, but has set a yearly earnings target below that of people who watch the world's largest retailer.

In a world where most Americans live near a Wal-Mart, Chief Executive Lee Scott is betting that trendier merchandise and a more appealing shopping environment will boost sales faster than simply opening new stores.

The company is clearly under pressure: Although this past week Wal-Mart reported fourth-quarter earnings were up 13.4 percent, its stock slipped as revenue fell short of Wall Street projections and its profit outlook also disappointed.

The chain's aim is not so much to get new customers in the stores but to lure millions of consumers who shop for basics like groceries and paper goods to the aisles that offer the more fancier clothes, electronics and home furnishings. The new merchandise ranges from the Metro 7 line of urban-style women's fashions to fish and shrimp certified to have been raised or caught in ways that do not harm the environment.

Analysts said the company needs these changes to help it reclaim sales lost to smaller, more upscale rival Target Corp.

Scott told analysts in October that 86 percent of Americans shop at Wal-Mart at least once a year, but the higher their income bracket, the less likely they are to leave the grocery or staples aisles.

While Wal-Mart is trying to raise its profile among more affluent shoppers, it's also trying to improve its image with workers and the public. Union-backed critics continue to hammer away at Wal-Mart for what they say are substandard wages and health benefits, and organized labor is pushing bills in about 30 states that would force Wal-Mart to spend more on health coverage.

Scott said last week that the company will expand lower-cost coverage for employees this year, the second improvement in health benefits in six months. The company said 615,000 of its 1.3 million U.S. workers were on Wal-Mart health plans as of January, versus 568,000 a year earlier.