Wal-Mart Sees $3 Billion Opportunity Refilling Empty Shelves

Wal-Mart Stores Inc. (WMT) executives, speaking at a company meeting this month, said its store shelves need to be better stocked with merchandise and that resolving the matter could be a $3 billion opportunity.

Improving “in-stocks” — a measure of how much merchandise is available for shoppers to buy — is a top focus for Wal-Mart, executives said at its Year Beginning Meeting, according to notes taken by an attendee that were reviewed by Bloomberg. The company also plans to add labor hours as part of an effort to bolster “in-store execution,” executives said at the summit in Orlando, Florida, which was attended by Chief Executive Officer Doug McMillon and U.S. CEO Bill Simon.

Wal-Mart, the world’s largest retailer, has struggled to keep shelves stocked over the past year at U.S. stores, Bloomberg News has reported, citing workers and customers. The lack of merchandise has frustrated some shoppers, prompting them to decamp to the chain’s competitors. Increasing labor hours could make it easier for staff to get inventory from the stockroom and replenish the products on the store floor.

The focus of the Year Beginning Meeting was “serving customers and reinforcing our commitment to serve them,” said David Tovar, a spokesman for Bentonville, Arkansas-based Wal-Mart. He didn’t elaborate on specific remarks from the event, which was held two weeks ago.

‘Positive Energy’

“More than 7,000 associates attended the meeting and there was a lot of positive energy,” he said in an e-mail. “We used the meeting as an opportunity to listen to our store managers and give them the tools they need to succeed so they can do what they do best, take care of customers.”

Wal-Mart has pared back its domestic workforce in recent years, putting a bigger load on the employees that remain. U.S. staff at the main Wal-Mart chain and Sam’s Club warehouse chains fell by about 20,000 between 2008 and January of this year, according to a filing this month. The company now has about 1.4 million workers nationwide. Over that same period, it has added more than 650 U.S. Wal-Mart stores, bringing the total to more than 4,200.

Groups such as the union-backed Organization United for Respect at Walmart have taken up the issue, saying employees are being stretched too thin.

“When you have to pick up the slack of people not there, you can’t do the job the right way,” said Richard Reynoso, an overnight stocker who has worked at Wal-Mart for almost three years in Duarte, California. He’s a member of OUR Walmart.

‘Scrambled’ Inventory

Reynoso said he and his co-workers have to work outside of their assigned departments to get everything done. On a given night, he can find himself stocking shelves in the hardware, auto, sporting goods and toy departments.

“Some people don’t know where things are supposed to go, so the merchandise ends up getting scrambled everywhere,” he said. “Either that or they don’t have enough time to put it in the real spot.”

Even as Wal-Mart tries to better stock shelves, the company is working to curb inventory growth in the U.S. — an effort to cut costs and avoid being stuck with slower-moving merchandise. Wal-Mart will try to limit its inventory increases to half the rate of sales growth this year, Chief Merchandising Officer Duncan Mac Naughton said at the meeting. In 10 of the past 12 quarters, growth of Wal-Mart’s U.S. inventory has exceeded that of sales.

Wal-Mart’s U.S. division had $279.4 billion in sales in the fiscal year ended Jan. 31.

Missing Estimates

The company forecast annual profit last month that fell short of analysts’ estimates, hurt by a still-sluggish U.S. economy and government benefit cuts. McMillon, who took the CEO job in February, is attempting to boost growth with smaller-format stores. The company plans to open 270 to 300 Neighborhood Market and Walmart Express shops this year, almost doubling the number.

Aubretia Edick, another member of OUR Walmart, said she hears customers complain every day that they can’t find what they’re looking for.

“It’s hard because I know the item is in the backroom,” said Edick, who works in Chicopee, Massachusetts. “We just don’t have the people to put the stock out.”

 

Sourced from Bloomberg.com