Wal-Mart Stores Inc. (WMT), the world’s largest retailer, projects that it could boost U.S. sales by about $5 billion a year by keeping store shelves more fully stocked.
Duncan Mac Naughton, chief merchandising officer for Wal- Mart’s U.S. stores, told suppliers’ executives in mid-February that the retailer’s sales would be higher if some items weren’t out of stock, said David Tovar, a spokesman.
Wal-Mart Stores Inc. signage is displayed outside of a location in American Canyon, California. Photographer: David Paul Morris/Bloomberg
Wal-Mart has been working for more than a year on improving inventory levels to boost sales. The company hired two firms — Acosta Inc. in the U.S. and Retail Insight in the U.K. — to walk the aisles and monitor stocking levels. The company also has pulled its greeters from the lobby to help load shelves.
“One of their biggest concerns is out-of-stock items,” Natalie Berg, an analyst with research firm Planet Retail in London, said in a phone interview. “If there are items out of stock, there is a real risk that the customer will take their entire basket elsewhere.”
The $5 billion in additional sales would be more than the $3.93 billion revenue gain Wal-Mart’s U.S. stores posted last year. Revenue in the nation rose 1.5 percent to $264.2 billion in U.S. revenue in the fiscal year ended Jan. 31.
Wal-Mart fell 0.2 percent to $59.77 at the close in New York. The Bentonville, Arkansas-based company’s shares rose 11 percent last year.
Wal-Mart has been making improvements with inventory and product availability, Tovar said. He said the $5 billion projection Mac Naughton made was a rough estimate in an “off- the-cuff” statement meant to motivate the company’s suppliers and employees.
Tovar said improving product availability and lowering prices has helped boost store traffic, contributing to the past two straight quarters of increases in sales at U.S. stores open at least a year.
“If we can get better on-shelf availability, he believes it will lead to more sales,” Tovar said. “Product has to be on the shelf for customers to buy it.”