The US Slump

Wal-Mart Struggles to Restock Store Shelves as U.S. Sales Slump

Bloomberg,

1 March, 2013

Wal-Mart Stores Inc (WMT), already struggling to woo shoppers constrained by higher taxes, is “getting worse” at keeping shelves stocked, the retailer’s U.S. chief told executives, according to minutes of an officers’ meeting obtained by Bloomberg News.

“We run out quickly and the new stuff doesn’t come in,” U.S. Chief Executive Officer Bill Simon said, according to the minutes of the Feb. 1 meeting. Simon said “self-inflicted wounds” were Wal-Mart’s “biggest risk” and that an executive vice president had been appointed to fix the restocking problem, according to the minutes.

Once a paragon of logistics, the world’s largest retailer has been trying to improve its restocking efforts since at least 2011, hiring consultants to walk the aisles and track whether hundreds of items are available. It even reassigned store greeters to replenish merchandise. The restocking challenge emerged as Wal-Mart was returning more merchandise to shelves after a previous effort to de-clutter its stores.

Wal-Mart’s inability to keep its shelves stocked coincides with slowing sales growth. Same-store sales in the U.S. for the 13 weeks ending April 26 will be little changed, Simon said in the company’s Feb. 21 earnings call.

Comparable sales increased 1 percent in the fourth quarter, compared with an average of 1.4 percent from analysts surveyed by Bloomberg. This year the shares have gained 3.7 percent, compared with a 6.2 percent advance for the Standard & Poor’s 500 Index. Wal-Mart fell 1.2 percent to $70.78 at the close in New York.

Personal Notes

“These are personal notes from one participant in the meeting and are not official company minutes,” David Tovar, a Wal-Mart spokesman said in a telephone interview. “There are a number of significant misinterpretations and misleading statements that do not accurately reflect the comments by Bill Simon or any other participant in the meeting.”

When Simon said things were “getting worse” he was referring to “modular changes,” the process of replenishing merchandise to keep up with customer demand and changing seasons, Tovar said. Wal-Mart is working to “manage this in the most efficient way possible,” he said.

“We’re very pleased with our in-stock position,” he said, adding that products audited by the company and its consultants match or exceed historical levels. He declined to disclose what those levels are.

Tovar declined to make Simon available for comment.

‘Dead On’

Evelin Cruz, a department manager at the Wal-Mart Supercenter in Pico Rivera, California, said Simon’s comments from the officers’ meeting were “dead on.”

“There are gaps where merchandise is missing,” Cruz said in a telephone interview. “We are not talking about a couple of empty shelves. This is throughout the store in every store. Some places look like they’re going out of business.”

Tovar said Cruz’s “comment appears to be national in scope. I doubt she had been to other Wal-Mart stores. I take issue with the quote.”

Cruz, 41, who has worked at Wal-Mart for nine years and oversees the photo and wireless sections at her store, said it can take weeks or months for merchandise to be replaced after it sells out.

“My camera bar hasn’t had cameras since early January,” she said. “They let the merchandise phase out but nothing new comes in to replace them. We’re supposed to have 72 cameras but we maybe have 12. What are customers supposed to buy?”

Working Conditions

Cruz, a member of OUR Walmart, a labor-backed group seeking to improve working conditions at the discount chain, also said the number of photo and wireless employees she oversees has decreased from about 13 people to seven since the beginning of 2012.

“We haven’t reduced staff,” Tovar said. “People may have been shifted.”

In her section at the store, the remaining workers have struggled to clear out old displays and quickly replace them with new merchandise, Cruz said. Meanwhile, they’re supposed to help customers with things like mobile phone contracts, a transaction that can take up to 45 minutes, she said.

“All of this is affecting customers,” Cruz said. “You see people walking out because they’re looking for anyone to help them and there’s no coverage.”

Simon said at the Feb. 1 meeting that he is trying to improve operations.

“We need to start with the intent that our shelves will be full,” he said, according to the minutes.

John Aden, executive vice president of general merchandise for Wal-Mart U.S., will be put in charge of addressing the issues, according to the minutes.

Logistics Master

For much of its history, Wal-Mart has been considered a master of logistics, persuading suppliers to set up shop near its operations. Yet in 2011, Wal-Mart hired consulting firms Acosta Inc. in the U.S. and Retail Insight in the U.K. for advice on how to keep its shelves stocked. Paul Boyle, the CEO of Retail Insight, didn’t return phone calls seeking comment. Meredith Rovine, a spokeswoman for Acosta, said representatives were unavailable for comment.

At that time, Wal-Mart’s struggle to keep shelves stocked stemmed from the return of about 8,500 items to stores, following a failed effort to streamline its merchandise. At an investor conference in June of that year, Simon said he was focused on improving the company’s restocking operations.

“The only thing that really matters to us is whether the product is on the shelf or not,” he said at the time.

According to the Feb. 1 meeting minutes, Simon said: “We have to get better and remain laser-focused every day because momentum can turn against you in a second.”