Reuters reports that at an analysts meeting this week, Wal-Mart management is expected to announce dramatic changes in its 517-unit Sam’s Club division, which has been delivering results that company CEO Lee Scott has deemed “not acceptable.”
Sam’s posted operating profit growth of just 3 percent for the second quarter, compared to the 17.2 percent gain posted by company’s discount stores; much of the problem can be attributed to tougher competition in the marketplace, and cannibalization of sales by the major companies operating clubs in the same markets.
Some analysts expect that Wal-Mart will decide to refocus Sam’s attention on business customers, as opposed to individual consumers, which would reduce inventory and SKU count. This also would mean slowing down the building of new clubs, phasing out pharmacies in the club units, and maybe even raising membership fees.
Wal-Mart also is expected to lay out for the analysts a strategy for even faster expansion of its supercenters and Neighborhood Markets.
Sam’s posted operating profit growth of just 3 percent for the second quarter, compared to the 17.2 percent gain posted by company’s discount stores; much of the problem can be attributed to tougher competition in the marketplace, and cannibalization of sales by the major companies operating clubs in the same markets.
Some analysts expect that Wal-Mart will decide to refocus Sam’s attention on business customers, as opposed to individual consumers, which would reduce inventory and SKU count. This also would mean slowing down the building of new clubs, phasing out pharmacies in the club units, and maybe even raising membership fees.
Wal-Mart also is expected to lay out for the analysts a strategy for even faster expansion of its supercenters and Neighborhood Markets.
- KC's View:
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Interesting, isn’t it, how the current Costco and Sam’s Club strategies differ. Costco is focused on trying to find new formulas and formats that will drive the business in new directions, while Wal-Mart is pulling back a bit on the club side.
We like the Costco approach, simply because it pushes retailing in new directions. But Wal-Mart certainly has a knack for making the right decisions, so it’ll be interesting to watch.
