Walmart turns to suppliers to secure discount crown
NEW YORK - Walmart (WMT) is asking suppliers to cut back on advertising spending in its stores as it seeks lower prices on goods that it sells to its own customers.
The request comes as the world's largest retailer, based in Bentonville, Arkansas, looks to reclaim its position as the low-price leader amid stiff competition and perk up sluggish sales in the U.S.
Historically, makers of consumer products like laundry detergent devote a portion of their budget to market their products at Walmart whether it's online advertising on social media or store displays. Walmart executives told suppliers in February they would rather have them reinvest some of that money.
Wal-Mart Stores Inc.'s actions were first reported by The Wall Street Journal.
Deisha Barnett, a Walmart spokeswoman, confirmed the strategy and said that the discounter has made that request in the past but described the recent overture as more of a "reinvigorated focus."
Walmart updated investors Wednesday on how it planned to reduce prices while revving up its assortment and improving the experience of shoppers by the holiday 2015 shopping season, the most important period for a retailer. The actions are being spearheaded by Greg Foran who last summer became CEO of Walmart's U.S. business, which accounts for 60 percent of its total sales.
"We want this year to be the year of improving our stores," Foran told investors.
Foran, who had been president and CEO of Walmart Asia, has been dissecting every part of the business, from improving the freshness of the produce to making sure merchandise is being unloaded onto the selling floor, instead of having it pile up in the backroom.
Among other measures it outlined Wednesday: Reducing the price of products nearing their expiration date, a strategy it believes alone will save $500 million annually. The company said that it's also looking at how it sources it products so it can reduce prices, particularly as commodity prices fall.
When asked about the latest development with suppliers, Foran just said that the company, which operates more than 4,500 Walmart stores, has always negotiated the best price and passes those prices to customers.
Walmart has acknowledged that it took some steps to increase productivity like reducing labor in the stores that ended up backfiring. But the company is working to rectify that issue. In February, it announced that it was raising the starting wage to at least $10 by February 2016 and improving its training for its hourly workers. It also said it was bringing back the department manager to be in charge of one specific area of merchandise.
Walmart eked out two quarters of consecutive revenue increases at stores opened at least a year in the U.S, after seven quarters of declines.
Shares fell $1.44, or nearly 2 percent, to $80.81 in afternoon trading Wednesday.