Sam's Club, the nation's ninth-largest chain store, hopes to beat the recession by cutting prices on specific items, offering more everyday goods such as food and health and beauty items and paring its assortment of general merchandise such as furniture and clothes, the company said Thursday.
"We're well positioned for growth in today's consumer environment," said Brian Cornell, president and CEO of the warehouse operator owned by Wal-Mart.
Cornell was addressing investors on the second of two days of analyst meetings in Roger, Ark., near the company's headquarters in Bentonville, Ark. The meetings were broadcast online.
Sam's Club generated $47 billion in sales last year, almost 12 percent of Wal-Mart's overall $400 billion in revenue.
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Sam's Club officials told investors that the company wants to steal customers from rivals - including grocery chains and warehouse stores such as Costco Wholesale - by focusing on fewer but bigger initiatives.
The chain is testing these changes in a few stores this fall and says its revamped stores will be less expensive to run.
Sam's Club will offer more variety and more brands of items from take-home meals to baked goods. The categories Sam's Club is expanding have higher sales and gross profit returns per square foot than the overall average for Sam's Club, company officials said.
FEWER LARGE APPLIANCES
In addition to cutting furniture and clothing items, the new breed of stores will have less space for large appliances, sporting goods and DVDs.
Sam's Club's plan to cut prices on specific items mirrors a move unveiled Wednesday by the Wal-Mart chain, which plans to cut prices of top-selling items each week through the end of the holiday season.
Cornell called the price cuts "strategic" and surgical." Sam's Club also is testing a new tool that calculates how much a shopper is willing to pay for an item - known as the item's price elasticity - and has used the information in choosing which products' prices to cut.
Sam's Club also plans to improve its products, particularly the food it sells, and has introduced a new quality process that better tests merchandise. Linda Hefner, executive vice president of merchandising at Sam's Club, said its boneless spiral ham, for example, sells for $2.86 per pound but compares in freshness and quality with a key competitor's product that sells for $7.49 per pound.
The new format also requires workers to stack merchandise one pallet high instead of two, which makes it easier to restock stores. Sam's Club estimates that such efficiencies can cut worker hours between 6 percent and 8 percent over the next five years, which will cut the chain's costs.