n Wal-Mart makes splashy price cuts to get its mojo back.
By ANNE D’INNOCENZIO
The Associated Press
NEW YORK – Wal-Mart is counting on $1 ketchup bottles and sub-$4 cases of Coke to get its low-price mojo back.
The sharp cuts at its U.S. Walmart stores, which came ahead of Memorial Day weekend, have already pushed rivals such as Target into price wars. And the markdowns are expected to keep coming throughout the summer.
They’re one of the boldest moves the world’s largest retailer is making to turn around sluggish business at its U.S. namesake chain and win back shoppers from rivals. The cuts aren’t across the store but target 22 foods and other essentials at an average savings of 30 percent – splashy enough to get attention and perhaps change perceptions.
The world’s largest retailer is also restoring items like certain soups and laundry detergent it stopped carrying when it tried to declutter its stores. It’s also pushing more basic clothing such as socks and underwear after putting too much focus on trendy items that didn’t sell.
Wal-Mart was one of the few beneficiaries when the Great Recession began, as shoppers traded down to save money. Now it’s having trouble keeping customers in a slowly recovering economy. Cash-strapped shoppers are looking elsewhere for better deals such as dollar stores and local grocery chains. And some wealthier customers, feeling more flush, are starting to head back to the mall.
Wal-Mart, which generated more than $400 billion in revenue in 2009, has blamed stubbornly high unemployment and tight credit for adding even more financial strain on its blue-collar customers, some of whom have limited access to financial services and are running out of unemployment benefits.
But it also takes part of the blame for four straight quarters of declines in revenue at Walmart stores open at least a year. That’s a key indicator of a retailer’s health.
“Wal-Mart is all about price, and they’re all about one-stop shopping. Those are the key ingredients,” said Bob Buchanan, a former retail analyst who now teaches finance at Saint Louis University. “Now, you kind of scratch your head and wonder if either of them are true.”
“Wal-Mart has made a lot of noise, but customers want to see it in the stores,” he continued. “This action is long overdue. They need to drive that message hard.”
Wal-Mart acknowledged during its latest conference call with investors that its moves to carry fewer items went too far. It’s now replenishing 300 it had dropped. Analysts estimated that Wal-Mart pared up to 15 percent of its inventory, sending shoppers elsewhere in search of their favorite brands.