WAL-MART REMODELS PROVIDING BENEFITS

ELLIOT ZWIEBACH

NEW YORK - To meet changing consumer needs more rapidly, Wal-Mart is remodeling stores department-by-department rather than updating entire stores individually, John Menzer, vice chairman of the Bentonville, Ark.-based company, told an investors conference here last week.

As previously reported, Wal-Mart expects to update 1,800 stores over the next 18 months, with about two-thirds scheduled to be remodeled by the end of 2006.

Speaking at the Credit Suisse First Boston Consumer and Retail Conference, Menzer said this new approach to remodeling started at the end of May.

Since each upgrade is expected to take eight to 10 weeks, none has been completed yet, he noted.

"We're using this as an opportunity to revisit the performance of each department in our stores to help us really focus on customers," he said. Menzer said the remodeling efforts will focus on electronics, home, apparel, and bath and beauty, with better signage and better adjacencies.

One of the changes in adjacencies involves a move of in-store pharmacies opposite the food sections - instead of placing them on the opposite side of the store - at 300 remodeled stores and all new stores, he said.

In tests, Menzer said the new pharmacy prototype has improved the performance of adjacent areas and improved overall gross margins without any changes in the merchandise mix.

In food, Menzer said Wal-Mart plans to boost its assortment of organic items as it remodels 370 stores in areas where it sees the highest opportunity in that category.

The new organic sets will include milk, private-label infant formula, and pet foods, he noted.

According to Menzer, Wal-Mart doubled the average number of organic SKUs at its stores, with some locations carrying 189 organic items compared with the chain's average of 109.