NEW YORK (TheStreet) - Wal-Mart (WMT) is betting that increased sales from entertainment products can help the retail giant counter heightened competition from rivals such as e-commerce leader Amazon (AMZN) and stablize holiday sales at a time when the economic recovery may be slowing.
An iffy economy made worse by the expiration of the payroll tax cut contributed to Wal-Mart's disappointing U.S. comparable sales in the first half of the year. Learning how the company expects to reverse that trend was top priority at this year's investor meeting, held Tuesday in Wal-Mart's hometown of Bentonville, Ark.
Wal-Mart shares were slipping 0.1% to $74.64 in mid-afternoon trading.
Wal-Mart is expecting increased holiday sales, executives said on Tuesday, led in part by discounts and the highly anticipated November releases of Microsoft's (MSFT) XBOX One and Sony PlayStation 4.
Bill Simon, head of Wal-Mart's U.S. business, noted said categories that have underperformed in recent weeks included dry grocery, snacks and beverage, consumables and products such as less-expensive digital televisions. The four groups created a collective "60 to 80 basis points of comp headwind for us in the second quarter."
The company expects better performance out of its entertainment category in the fourth quarter, given the launch of new gaming consoles, Simon said.In addition, tablets represent four of the five top items customers have put in holiday layaway, the company said.
Longer term, it plans to build on well-performing categories like fresh meat and seafood as well as apparel. The company also increased its targets for smaller format stores. It now plans to add roughly 400 Walmart Neighborhood stores -- its grocery equivalent -- over the next three years for a total of 700. Executives took the stage on Tuesday to present detail on the company's operations, specifically addressing how it plans to improve disappointing U.S. comp sales, distribution streamlining, such as using more supercenters as distribution centers for smaller stores and increasing the number of small-format stores at a faster pace than expected. Driving membership at the company's Sam's Club, international expansion and investment in its e-commerce business while managing capital discipline and reducing operating expenses, are also among its priorities. "No matter what environment we are in -- today, a year from now, or five years from now-- we are driven to win and we are never satisfied at Wal-Mart until we do," President and CEO Mike Duke said during opening comments this morning. "We are in a tough and we are in an unpredictable global economy ... It comes as no surprise that the government shutdown is on the minds of our U.S. customers. We're following this situation very closely."
Wal-Mart is scheduled to reports its third-quarter earnings on November 14. -- Written by Laurie Kulikowski in New York.
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