Walmart launched a lot of apparel and home brands. Now, that strategy will be put to the test

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  • Walmart has launched style-forward brands, added national brands and rolled out a new store design to try to sell more discretionary merchandise.
  • The retailer’s willingness to sell more high-margin items has become more urgent after Wall Street disappointed with its fiscal first-quarter earnings and cut its profit expectations.
  • The company plans to expand its new store design, which draws attention to apparel and home, to 30 more stores by the end of the year.

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Springdale, Arkansas – Dressed mannequins. Attractive display of attractive furniture and colorful swimsuits. And store signs that promote exclusive brands and nationally recognized ones.

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Walmart’s redesigned supercenter, located just 16 miles from its Northwest Arkansas headquarters, reflects the retailer’s ambitions So that more and more customers can turn to its stores and website and fill their fridges as well as their closets and living rooms.

This is the new model from the retailer, and it will soon spread across the country. Chief Merchant Officer Charles Redfield said Walmart plans to open 30 more stores by the end of January and plans to open hundreds more in the next fiscal year.

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He added that the locations will be slightly different and will have different elements of the Pilot Store. They’ll be tested and learned before Walmart’s looks are introduced more widely, he said.

Walmart is the nation’s largest grocer by revenue, but it wants to sell more of the higher-margin goods like apparel. Over the past five years, the retailer has launched new brands and partnered with companies such as Reebok, Gap and Justice to expand its offerings into apparel, home and other discretionary categories. Those brands often come with a high price point and a focus on style. Many are expanding into Walmart’s big-box stores.

The retailer’s strategy has taken on more urgency after Walmart’s first-quarter earnings disappointed Wall Street last month and cut profit expectations. Walmart’s mix of merchandise contributed to a decrease in its earnings during this period. As customers spent more on groceries and gas due to inflation, some chose not to buy other, more profitable items like clothes and TVs – the same purchases that drive profits.

a changing consumer

A pullback on discretionary spending is hitting retailers in general, especially as companies rewind a year-ago period when shoppers had extra dollars from stimulus checks. For Walmart, general merchandise sales in the U.S. slipped in the first quarter, a dollar lower than the year-ago period, while total U.S. net sales rose to $96.9 billion, according to a Walmart filing.

To ease the hassle, retailers — including Target, Kohl’s and American Eagle Outfitters — have racked up excess inventory as consumers stash some popular pandemic items, watch budgets and travel or eat instead of luggage. decide to spend.

Walmart reported that it also had excess merchandise, with inventory levels up about 33% from a year ago. US CEO, John Furner, said at an investor day last week that it will take “a few quarters” for the retailer to get back to where it wants to be. He estimated that about 20% of that overage is consignment that the company would “just wish away”. After Target shared its aggressive inventory plans, the company declined to comment further on its strategy for selling through its wares.

According to the company’s filings, about 32% of Walmart’s US net sales in recent years came from general merchandise. That dropped to 28% in the most recent quarter. At Target, 54% of sales come from general merchandise, according to its most recent annual report.

There’s a huge opportunity for Walmart if it can harness the frequency of grocery shopping at stores and the popularity of online options like curbside pickup to increase general merchandise sales, said Robby, a retail analyst at Bank of America. Ohms said.

Plus, he said, creeping prices could encourage a new or less Walmart shopper to give the discounter a shot.

“Everyone is like managing inflation,” Ohms said. “There are going to be groups of people who find themselves at Walmart that normally don’t — so they may get a better flow of customers as people become more value-conscious.”

greed for low prices

On its website and in the growing number of its stores, Walmart has expanded its styles and price points. Along with affordable basics, it sells sundresses and tops from specialty brands, scoop and free assembly, that customers can pack for a holiday or wear to a party. It consists of jeans that a customer can wear to dinner from Sofia Jeans, an exclusive brand developed with actress Sofia Vergara.

And in-house, Walmart is also selling more aspirational styles—including a collection developed with Clé Shearer and Joanna Taplin, the stars behind Netflix’s “The Home Edit.”

CEO Doug McMillan said Walmart’s range would help better weather the inflationary period.

At an investor day earlier this month, he and other Walmart executives stressed that the retailer would continue to offer entry-level price points for customers living on tight budgets. It will lower prices not only on staple foods like rice, tuna and macaroni cans and cheese, but also on common goods like T-shirts and tennis balls.

But it can also attract customers who have more money to spend, McMillan said.

“As you move up the income scale, how many customers can you attract in areas that you are not doing business with them often?” They said. “Can we move some of the volume into apparel and home and maybe even some of the consumable categories as people become even more price-conscious?”

Redfield said Walmart attracted consumers with basics and groceries, but was losing them when they were shopping for other items.

“They had to go somewhere else to get what they wanted from a style and quality standpoint, so we said, ‘We have to fix that,'” he said in an interview.

Silk Scrunchies, Craft Beers and Sundresses

Inside the redesigned store in Northwest Arkansas, the clothing department has low racks and wide aisles to encourage browsing. It has dedicated areas that resemble mini shops for national brands, such as Reebok and kids’ clothing brand Justice. And it puts Walmart’s own fashion and home brands front and center with mannequins and displays that suggest how to put together an outfit or a room.

Walmart delivers direct-to-consumer brands that resonate with smaller, social media-savvy customers with more square footage in stores, including shaving company Billy’s and dog food company Jinx.

One of the other big changes? National apparel brands and Walmart’s advanced clothing brands have smaller price signals A big break from the retailer’s tendency to make numbers bigger and bolder.

“We are selling apparel in the grocery store, although that doesn’t mean we have to sell apparel,” said Elvis Washington, Walmart’s vice president of marketing, store design, innovation and experience. “Apparel is a discretionary category. It’s sentimental. You want them to fall in love with fashion.”

“This is where you really want them to look, feel, touch the item and then validate the choice by looking at the price point on it,” Washington said. “We are letting the product be the hero and set the tone.”

The shop also has a different view in the grocery department. The wine aisle is large and includes expensive red wines and top-shelf champagnes. The craft beer section is also prominent. Redfield said both changes are geared toward a more modern millennial customer.

“We’re going to sell a lot of underwear and socks,” he said. “We sell a lot of underwear and socks. We’ll continue to sell that, but we’re not going to force our customer to go anywhere else when they want something special.”

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