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And the Real Culprit Behind Wal-Mart's Sales Decline Is...

Wal-Mart's flailing sales may have nothing to do with assortment or price.



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issues may have nothing to do with price or assortment, but a change in shopping patterns.

The discount behemoth's new CEO Bill Simon attempted to quell investors fears during Goldman Sachs' Global Retail Conference taking place in New York this week, regarding declines in U.S. same-store sales.

Wal-Mart attempted to attract shoppers this spring with aggressive roll backs, but according to Simon, these deep discounts did not achieve the desired results. "It drove price perception, but not sales or traffic," Simon said. The company decided to return to its motto of everyday low prices, and Simon notes that traffic has improved -- though sales still remain negative.

Wal-Mart is also in the process of returning some merchandise to its store shelves that it previously removed under its "Project Impact" initiative. The company has already put dry grocery items back on the shelves and is now working on hardware and fishing. Simon said they are "going as fast as we can" to get products consumers have demanded back into the stores.

Despite assumptions that declining sales are from Wal-Mart losing higher-end customers it won over amid the recession, Simon says the reduction of shopping trips from mid-to-low income shoppers is actually the culprit.

"We didn't see loss of customers, but the number of trips. I believe this loss of trips were because we couldn't fill our assortment," Simon said. "As we bring items back it should boost traffic."

Both of these initiatives are expected to boost sales by the holiday season, Simon said. But retail expert Craig Johnson, president of Customer Growth Partners, isn't so certain that these efforts will bear fruit.

"Today's consumers are opting more for shorter, quicker and more focused shopping trips -- not the 'stock-up' trips their mothers would take -- and Wal-Mart's U.S. stores are simply not designed for either the convenience or opportunistic shopping mission," Johnson said in a report. "Wal-Mart's real sales problem lies not in its 'Action Alley,' but in its anatomy -- 160,000-plus square feet stores that consumers find hard to navigate quickly or easily."

The absence of a chief merchandising officer is also raising a red flag for investors. Wal-Mart has decided to hold off on naming a new CMO after the departure of John Fleming.

Instead, the company appointed four new heads of product to adopt these responsibilities. Wal-Mart has created four core merchandising areas around general merchandise and replenishment, food, softlines, and consumables, health and wellness, as well as John Westling, Jack Sinclair, Andy Barron and Duncan MacNaughton, will head up those divisions, respectively.

But Simon said this shouldn't be a concern since the company has operated successfully at other times without a chief merchandiser.

--Written by Jeanine Poggi in New York.

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