Simon Says, Walmart Is Going to Head Downmarket Again
Walmart (WMT) has slung the "Under New Management" signs across its locations in the United States as it has appointed Bill Simon (pictured) to revitalize store productivity.
The move that made Simon the new president and CEO of Walmart U.S. and related executive developments suggest that Walmart may be refocusing on lower income consumers after initiatives to make it attractive to affluent shoppers stalled.
With the retailer poised to add more smaller stores in communities including urban neighborhoods where working with local government agencies will be key to expansion, Simon has experience that Walmart can use. Critically, he was an executive with Brinker International (EAT) and oversaw chain restaurants such Chili's, Romano's Macaroni Grill, On the Border and Maginot's Little Italy, relatively small sized but dynamic operations located across a wide range of communities. His background includes government service in the Navy and as Secretary of Florida's Department of Management Services.
He also has experience working for top consumer brand producers such as Diageo (DEO) and PepsiCo (PEP), with all their expertise in distribution systems, marketing and product presentation. Given his consumer products background, Simon is in a strong position to assess the Project Impact. Walmart already has determined that it cut back on products too severely under the initiative and has restored some to the shelves. Simon can make additional adjustments and help smooth relationships with suppliers who have suffered elimination of products and demand for promotional support funds under Project Impact.
He may even restore some of the clutter. In reducing the scale of displays and opening up aisles by reducing floor presentations, Project Impact left the stores looking a bit more open, and a bit more like Target (TGT) and Kohl's (KSS). Yet the affluent customer that it was intended to impress reacted stronger to Walmart prices in the recession than to neater stores in the recovery. At least that's what is suggested by the retailer's recent decline in comparable store sales, those in locations open for at least a year.
And even as more upscale rivals such as Target recover sales, deep-discount grocery operators such as Aldi and dollar stores continue to build on gains that began in the recession but have not been stymied by the recovery. Their advance has cost Walmart market share. Recent reports that Walmart is preparing to launch a bargain grocery operation in the Sacramento area may be more evidence that the retailer is giving up on its attempts to draw affluent consumers and refocusing on lower-income shoppers.
The executive shuffle is another suggestion of a change in direction. Eduardo Castro-Wright gave up the Walmart U.S. CEO spot in exchange for an appointment as president of the retailer's new Global.com and Global Sourcing operations. He was a driving force in Project Impact, even given the task of talking up the initiative at the company's recently concluded annual meeting. John Fleming, chief merchandising office, has departed the company. He once headed up Target merchandising and was a major figure in Walmart initiatives to draw affluent customers initially through more stylish apparel then via more sophisticated display.
On top of all that, CEO Mike Duke's statement regarding the executive changes dropped some compelling hints. He praised Castro-Wright's "visionary thinking" while noting Simon's "execution skills." Those were applied to getting Project Impact going in stores. Yet, when it came time to point to a particular achievement, Duke chose to note Simon's work on Walmart's $4 prescription drug program, a strategic discounting effort that has helped drive customers to the retailer's pharmacy department much as the retailer would like the initiatives it has lately pursued in other parts of the store to coax more customers through its doors.
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