Last Updated Apr 22, 2010 2:47 PM EDT
What's Walmart's action plan to turn Sam's around? Um, there doesn't seem to be much of one. The annual report mentions inventory cuts and "eliminating non-value-added activities" (whatever those are), both moves meant to help reduce costs that do nothing to bring in customers. Reducing inventory also backfired at Walmart, and could turn customers off at Sam's as well. Walmart improved its leverage in the past year a hair, to 7.6 percent of net sales. Sam's doesn't do nearly as well, with operating income representing just 3.2 percent of sales.
A planned move to invest more capital in remodeling stores could help a bit with older units. But after all, it's a warehouse format that customers expect to be pretty bare-bones, so it's unclear how much that might drive sales.
On the plus side, Walmart says its focused on measuring member opinions at Sam's, so if they listen to that feedback it might pave the way to some meaningful initiatives that would grow sales.
Sam's is certainly not adding many stores -- while the international store-count for Walmart exploded last year, U.S. chain Sam's actually closed 10 units to end the year just under 600 stores. Sam's plans just five to ten new stores this year, which will only get it back to the store-count it had two years ago. Growth-wise, the chain is pretty much at a standstill.
For comparison, more upscale discounter Costco saw sales rise 8 percent in the past six months, 2 percent at established U.S. stores. Costco says it plans seven or eight new opens, which would give it around 575 units. It's not hard to envision Costco passing Sam's in store count in the near future.
With the economy down, Walmart doesn't seem to have provided discount shoppers with a compelling reason to pay a membership fee for Sam's goods when they could go to Walmart (often nearby) and buy many of the same items at those famously always-low prices. With Sam's now representing less than 12 percent of Walmart's total sales and the company planing a massive, 600-store expansion overseas this year, Sam's Club is getting treated like the company's redheaded stepchild for now.
Photo via Flickr user rutlo