ROGERS, Ark. — Wal-Mart Stores said Wednesday it plans to invest $6 billion in retail pricing by 2017 — a year after it promised to invest $2 billion in price through 2014. Speaking at Wal-Mart's 19th annual Meeting for the Investment Community here, Duncan McNaughton, chief merchandising officer, said the investments will be broad-based, though they will primarily be in food and consumables.
He said the company would deliver on its pricing promise “through productivity initiatives, logistics initiatives and cost-of-goods savings.”
Ads that compare Wal-Mart prices on a basket of goods against those of local competitors are working so far, he noted, with comparable sales and traffic up 1% compared with a control group of stores, “which means those efforts are resonating with customers."
With the campaign running in 31 U.S. markets that cover about 40% of the company’s food sales, the average price gap has been 17% against food competitors and 20% against health and wellness competitors, McNaughton said, including a gap of 23% against Safeway, 22% against Albertsons, 15% against Publix and 12% against Kroger.
Wal-Mart is also focusing on merchandising by stocking basic destination items; offering good, better and best selections; offering relevant brands; and localizing the assortment, McNaughton said.
“We’re going market by market, category by category, brand by brand and product by product — diving deep into what product sells for, not shelf prices or average prices but at what decile the product is moving and where we need to be priced.”
Regarding store formats, McNaughton said Wal-Mart intends to continue to focus on supercenters in its top 15 core markets, “where we believe there is a substantial runway left. We will keep our supercenter unit count roughly flat, but using capital more effectively, we will take markets that are above average in profitability and market share and move those with a medium share up to a higher share.”
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He said Wal-Mart expects to have more than 500 Neighborhood Markets in operation by fiscal 2016 — close to double the number it operates today — with $10 billion in sales. “We’ve effectively doubled and doubled again the business at those stores over the last few year, and the comp sales are two times the rate of the fleet, at more than 5%.”
Regarding the company's 12 Express stores, McNaughton said Wal-Mart has been pleased with their sales. “They’ve comped better than we had imagined as they hit their first year, and they've reached profitability faster than we thought they would. However, the return is not where the other formats are, so we will continue to build both Express stores and Neighborhood Markets, and when the Express stores are as productive as the Neighborhood Markets, then we’ll roll those out at the same pace.”
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