Sam's Club focusing on remodels in a bid to increase sales

SAN FRANCISCO Thu Oct 22, 2009 12:03pm EDT

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SAN FRANCISCO (Reuters) - Wal-Mart Stores Inc's (WMT.N) Sam's Club division is shifting its focus from opening new clubs to remodeling existing ones as it strives to increase sales, the company said on Thursday.

The No. 2 U.S. warehouse club operator also said it is testing a new store layout, revamping merchandise to add more food and drugs, and streamlining operations so it can reduce labor hours in its clubs 6 percent to 8 percent over the next five years.

"We are absolutely raising the bar on club productivity, while also focusing on improving that in-club experience," Sam's Club Chief Executive Brian Cornell said at Wal-Mart's analyst meeting.

Earlier this year, Wal-Mart tapped Cornell, the former Michaels Stores Inc chief executive, to be the CEO of Sam's Club. Cornell replaced Doug McMillon, who became president and CEO of Wal-Mart International on February 1.

Analysts have been waiting to hear how Cornell plans to increase Sam's Club sales and boost membership. Sam's Club members pay a fee to shop in its clubs and receive discounts on goods from computers to jumbo packages of paper towels.

Sam's Club sales fell 3.2 percent to $11.91 billion in Wal-Mart's second quarter that ended July 31, while sales at clubs open at least a year, or same-store sales, rose 0.6 percent.

NEW STORE LAYOUT

The retailer said on Thursday it will increase space in its clubs for produce, meat and bakery items, over-the-counter drugs, and health and beauty-care items. It is cutting space for large appliances, sporting goods, furniture, movies and DVDs.

The new store layout being tested also includes a large center aisle and improved sightlines across the store.

Sam's Club is also adjusting its growth strategy.

"We're shifting our focus from new-store growth to remodeling our existing base," Cornell said.

The retailer plans to remodel 50 to 55 clubs this fiscal year, and 70 to 90 next fiscal year. That is up from 21 remodels last year.

Meanwhile, it will open or relocate 15 clubs this year, and five to 10 clubs next fiscal year. That is a decline from last year, when it opened or relocated 20 clubs.

While Sam's Club caters to individuals and small business owners, the retailer said it is increasing its focus on a third type of member -- the business owner who also shops there for family needs.

Sam's has also launched a new program called "eValues," which is aimed at getting consumers to sign up for its more expensive membership. Those that do will then get access to special coupons to use in-store.

Wal-Mart shares slipped 44 cents , or less than 1 percent, to $50.19 on the New York Stock Exchange.

(Reporting by Nicole Maestri, editing by Dave Zimmerman and Maureen Bavdek)

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