Wal-Mart Plans Higher-End Stores
This week Wal-Mart reported disappointing earnings for the second quarter and predicted more troubles to come, blaming its poor clothing and home decor products as well as higher energy prices and problems in the housing market for the subdued earnings outlook. Shares in the company promptly fell 5%. (For more complete coverage of Wal-Mart's woes see our recent feature package on the issue.)
In an effort to combat the company's mounting problems, the Wall Street Journal reports that Wal-Mart executives are considering opening smaller, higher-end stores to compete with more upscale grocery retailers, particularly to counteract Tesco's impending push into the U.S. market. These new stores would attempt to draw upper-income and urban shoppers that have not previously used Wal-Mart.
Writing on Bloggingstocks.com, Douglas McIntyre is skeptical of the plan:
"With Wal-Marts huge revenue and flattening sales in the US, smaller outlets can do little to help a company that measures it US sales in the billions of dollars per quarter. Even scores of smaller stores are unlikely to do a great deal to lift Wal-Mart's domestic fortune. Time spent working on niche operation is time spent away from trying to solve Wal-Marts biggest problem."McIntyre's point is well-taken, though with Wal-Mart's reputation for unfair labor practices and complete lack of cool, and recent worries about product safety, it seems unlikely the retailer will be able to woo many hip urban shoppers, even with an extensive re-branding effort. Recent reports on Consumerist.com that Wal-mart employees are skulking around K-Mart on low wage industrial espionage missions, probably won't help the company's reputation much either.
(Image of protest against Wal-Mart by urbanshoregirl, CC 2.0)