In the money: Wal-Mart apparel turnaround efforts gain traction
Wal-Mart has revealed that efforts to turn around its apparel business are finally starting to gain traction, with the US retail giant this week reporting the first full-year of positive comparable apparel sales for seven years.
The revelation came as the world's largest retailer yesterday (21 February) posted its fourth quarter results, in which profit surged 8.6% to US$5.6bn and revenue rose 3.9% to reach $127.1bn.
Commenting on some of the "merchandising highlights" from the three months to 31 January, Bill Simon, president and CEO of Wal-Mart US, said the retailer posted low single-digit positive comps in apparel in its domestic business, "driven by the improved quality of our offering."
He added: "Over a year ago, we put in place our new apparel strategy that focused more on basics and essentials. This quarter...marks the first full year of positive comp sales in apparel in seven years."
The company's Sam's Club warehouse division also reported mid single-digit comparable sales for apparel during the quarter, with Rosalind Brewer, president and CEO of Sam's Club, pointing to a high sell-through of children's and women's apparel, "leading to a successful transition to spring merchandise."
In Canada, however, unseasonable weather "negatively impacted" sales of apparel during the holiday season.
The news came after Wal-Mart recorded an 8.3% rise in full-year profit to $16.9bn, helped by a 5% lift in sales to $466.1bn. International sales rose 7.4% to $135.2bn, while the US division recorded 3.9% growth to $274.5bn.
Speaking to investors, president and CEO Mike Duke, said the retailer's EDLC (Every-Day Low Costs) - along with its broad assortment - were key to driving sales. "Strong merchandising, efficient operations and thoughtful use of capital will keep Wal-Mart US strong into the future."
Expansion of George brand
The company's UK-based clothing brand George at Asda also recorded growth.
Andrew Moore, chief merchandising officer for general merchandise at Asda and George, said the George brand had a "record year" for sales, profit and market share.
Full-year like-for-like sales at Asda increased 1%, rising 0.1% over the quarter ended 5 January. Overall sales rose 2.2%, while comparable sales were down 0.1%, excluding fuel, on the back of a strong performance within apparel, home and core grocery.
George at Asda said it expects to be present in 24 countries by the end of September, driven primarily through online expansion. The brand, which is available in the UK, Middle East, Japan, Chile, Canada and the Channel Islands, will expand online delivery across continental Europe to 24 countries by the end of the third quarter.
Asda said it is also in talks to expand the George brand to Wal-Mart's South African banner Massmart, with both distribution and manufacturing to take place in the country.
The results would seem to suggest that despite suffering a bumpy ride over the last few years, Wal-Mart's efforts to breathe new life into its apparel business have started to take shape.
Two years ago, in 2011, the company admitted its apparel business weighed heavily on its performance, with the retailer struggling to convert enough of its grocery customers to shop for clothing and footwear.
Its solution has been a move away from image-led fashion items back towards basic essentials like underwear and socks and T-shirts.
"When it comes to fashion, customers don’t want to see 10,000 others wearing the same clothes,” Simon explained at Wal-Mart's annual shareholder meeting in Arkansas in June 2011.
Wal-Mart has also moved its fashion offices back to its headquarters in Bentonville, Arkansas, as part of its new approach for apparel.
And last month the company pledged to increase the amount of apparel it sources from the US, as part of wider plans to boost US manufacturing and help create more jobs.
It is also confident recent plans to enforce a “zero tolerance” policy on unauthorised sub-contracting with suppliers will ensure "a world-class compliance organisation," according to Duke.
New guidelines were unveiled in January in response to the fire at Tazreen Fashion in Bangladeshlast year where more than 112 workers lost their lives. The factory had been producing apparel for Wal-Mart through an unauthorised subcontracting arrangement.
"We made significant improvements to our compliance programmes around the world in fiscal 2013 and took a number of specific actions with respect to the processes, procedures and people," Duke told investors.
"We've spent thousands of hours and millions of dollars with compliance experts on anti-corruption support and training. We will have a world-class compliance organisation."
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