Wal-Mart Aims To Be More Fashionable

After what seemed to be a never ending series of missteps, Wal-Mart (WMT) would seem to be getting back its mojo.

On Wednesday, Wal-Mart.com CEO Raul Vasquez said the company's "Site to Store" program that lets shoppers order online and ship for free to nearby stores was very successful. Yesterday's same store sales results gave a whole lot of credence to those remarks. Sales of flat panel televisions, MP3 players, video game hardware and accessories, laptops and desktop computers had significant year-over-year gains. Computer sales were fueled by the introduction of select Dell computers now sold at Wal-Mart stores and Sam’s Clubs throughout the United States. Less than a month ago I commented on the significance of the Dell (DELL) move and it seems to be a winner.

For months prior to recent events, investors including yours truly had been screaming for a reduction in new store growth and a meaningful share buyback. At the annual meeting in June, executives finally acknowledged they are no longer a growth company and have scaled back those plans and announced a $15 billion share repurchase plan. Yet, the stock had been stagnant as investors waited to see the results of their actions. The answer came today and investor liked those results.

The final piece of the Wal-Mart gripe is clothing. To be frank, virtually every other retailer trounces Wal-Mart here. Whether it be JC Penny (JCP), Target (TGT), Sears (SHLD), or Macy's (M), Wal-Mart offerings are woefully inadequate in comparison. The questions begs to be asked, what would happen to sales if they ever got clothing right? The answer should make investors salivate.

Maybe we have the beginnings of something here now. Wal-Mart has agreed to a 12-year lease for a new 47,000 sq. ft. studio in Manhattan that will replace two nearby studios, which combined, are only a fraction of the new one. This demonstrates a long-term commitment by Wal-Mart to attract more top talent to pick and design its fashions that had been hampered by the location of Wal-Mart's headquarters in Bentonville. It seems they now recognize Bentonville, while a very nice community, is not a particularly big attraction for those in the fashion scene.

This event, while not very widely reported, may be the most significant move they have made long term to date. Along with slowing store expansion, many of us begged them to invest in apparel and get it right. This is a first and a huge step. Wal-Mart, who can squeeze a profit out of a penny like no other retailer, will not let this sit for 12 years and not produce. They are going to put the money necessary into it to make it work. Locating the facility in NYC will give them access to top and upcoming talent that being in Bentonville just prohibited.

While nothing is certain, Wal-Mart is on a roll recently and the potential for this move to pay off is staggering. If people ever thought of Wal-Mart for quality and stylish clothing instead of just cheap, company sales would explode. For proof, just look what the Dell move did for their electronics sales almost immediately.

The stock buyback, the slowed expansion plans, the Moneycenter announcement, selling Dell's and the Site-to-Store program all have been great moves. Thursday's results mean that their effects are beginning to show up on the bottom line.

I said before that Wal-Mart was getting real hard not to buy, and I did just that only a few days later. Now I am saying that it is real hard not to buy more.

Disclosure: Author is long WMT and SHLD.

WMT 1-yr chart:

Comments

[Paul Meisel]

Todd -- have you ever spent a Saturday morning in a Wal-Mart parking lot? My wife used to say that their customer base consisted entirely of women who didn't own mirrors, and either didn't have sisters or were estranged from them.

The only clothing I consider buying at Wal-Mart or Sam's Club is underwear and white socks, and I am not always satisfied with the selections of those.

I think if they really put a push on clothes it would still take them years to overcome their reputation.

[todd su]

paul,

i think they are a far way from being a destination for clothing. but, if they just rise to acceptable, with all their locations we are talking about major dollars..

[Long-ShortGuy]

Interesting:
<blockquote>
<b>Wal-Mart throws its weight behind push to cut back on packaging</b>

Marketers have plenty of reasons to cut down on packaging for their products - as a way to reduce costs, for example, or to address growing environmental concerns. But there is an even more powerful motivator starting to nudge them along: Wal-Mart.

The world's largest retailer, famous for twisting its vendors' arms to get them to lower their prices, has begun pressuring its 66,000 vendors to get rid of excess packaging...
</blockquote>

Source:
www.iht.com/articles/2...