Wal-Mart will officially unveil its smaller format Wal-Mart Express stores in the second quarter, and according to Bill Simon, the chain’s president and CEO of its U.S, operation, will open hundreds or more smaller stores under multiple brands in the coming years.
Simon spoke at the Bank of America Merrill Lynch consumer conference in New York earlier this month. Despite a modest sales slump, which has resulted in the Bentonville, AR retailer showing identical store declines for seven consecutive quarters, Simon noted that “sales have been very encouraging” since after snowstorms hit much of the country and kept consumers homebound in early February.
“We’ve seen an improving positive trend in the business over the last four weeks,” Simon stated. He added that its first quarter results will be driven by how well Wal-Mart fares during its Easter selling season.
Simon told the analysts that part of Wal-Mart’s problem is that it had strayed from its core selling principles of offering the lowest cost and biggest selection. It will run television ads to promote its policy to match any competitor’s advertised prices on all merchandise, as well as its broad selection.
The first Wal-Mart “Express” store will be 14,440 square feet and open in Gentry, AR, a town of 3,158 located about 20 miles southwest of the company’s Bentonville headquarters. Other “Express” sites are expected to open soon after in the rural Arkansas towns of Prairie Grove and Gravette. The new stores will feature a pharmacy, however not all “Express” units will offer a pharmacy, so the company can evaluate which model works better. The “Express” stores are expected to cost in the $1.2 million range. The retailer will reportedly test different mixes of products in the initial stores as it fine tunes its new format which will be expanded to both rural and urban locations. The first unit is expected to open by mid-summer.
Simon also noted that the world’s largest chain has brought back “action alley,” an area of the store where its most popular discounted merchandise is aggressively merchandised, noting that the restoration of “action alley” adds 10 to 20 basis points of same-store sales growth.
In his presentation to the analysts, Simon asserted that Wal-Mart’s past efforts to reduce SKUs as well as decrease the physical size of some departments, like toys and apparel, backfired, as customers went elsewhere to buy the products Wal-Mart no longer carried. He also addressed the chain’s Neighborhood Market stores, Wal-Mart’s previous attempt at downsizing its “division one” and SuperCenter models. Those units he acknowledged haven’t done as well as hoped and will get rebranded as Wal-Mart Market, with more of those stores to be opened in the future, too. Simon added that debut Wal-Mart “on campus” store, at the University of Arkansas, is exceeding the company’s expectations thus far. In other topics covered by Simon, the company is expanding its “pick up today” program nationwide, with approximately 3,600 stores expected to participate by June. The program allows customers to order about 20,000 items online with free, same-day pickup at their local Wal-Mart unit.
Simon also unveiled three new commercials. In one spot, several Wal-Mart associates express their disenchantment when a customer claims that a competitor is offering a product for 20 cents less than Wal-Mart. The background music is the instrumental from Twisted Sister’s song, “We’re Not Gonna Take It.” “Everyday low price, broadest assortment possible,” Simon asserted. “Everyday low price, broadest assortment possible. That’s who we are, that’s where we’ve been, that’s where we’re going.”