Wal-Mart Loses Its Way

Shifting Sales Focus

As I mentioned yesterday, I was closely watching Wal-Mart's international division. Sales in that segment grew 18.5% and represented 23% of total sales. That's up from 21% of total sales in 2006.

Sales at U.S. stores, meanwhile, climbed just 5.6%. Same-store sales for the quarter dropped 0.1% at Wal-Mart stores, compared with a 3.8% rise in the year-earlier period. In the second quarter, Wal-Mart expects comps in the U.S. to rise 1% to 2%.

Until the domestic issues are solved, the international segment cannot afford to slip up.

A mammoth company such as Wal-Mart will always have issues. Indeed, the company is facing its fair share of turmoil -- ranging from townsfolk trying to keep stores out of their area to managers in alleged trysts and spying. But very few of those issues actually affect sales.

What Wal-Mart needs to do is rediscover how to connect with its customers. Shoppers can enjoy a more pleasant experience at Target (TGT Quote) and elsewhere. Thus, Wal-Mart customers have to be confident they will get extraordinary value for their basic needs, such as with the company's $4 drug program.

While everyone would like to save money on a 42-inch flat panel, I'm not sure that will serve the core customer, nor lead to much incremental business beyond the sale of that TV. Until Wal-Mart finds its way, don't expect a huge improvement in sales.