Wal-Mart Fashion Merchandise Disaster: "I Told You So"

Today's Wall Street Journal 'officially' reported what I have suspected for some time- Wal-Mart's attempted move upmarket into fashion merchandise has failed.

As long ago as last fall, in a post here, I predicted this. I broadened my scope of analysis, but reiterated my view in a post here, last month.

The Journal article quotes one young shopper as not converting to the 'new' Wal-Mart, and shopping, instead, at Express, one of the Limited's chains. On a broader basis, the apparel segment had a banner month in September, measured by one analyst's index as being up 8.8%, while Wal-Mart's same-store sales only increased 1.3%.

Target, one of Wal-Mart's next-step-up competitors, had 6.7% more sales from same-stores last month. Clearly, something isn't working well at Wal-Mart, and the company is somewhat guardedly admitting this.

The article quotes Wal-Mart as saying that last month's clothing sales "failed to meet our expectations." Further on in the piece, it discusses how many store managers don't actually put the time or money into more upscale women's department's displays, and that "company merchandisers don't have much clout" to effect change out in the stores.

Perhaps the most damning evidence concerning Wal-Mart's failed move upmarket is this. In the WSJ piece, it quotes the founder of America's Research Group, a home polling research outfit, as saying, "I can't find any significant difference between a year ago, two years ago, and today among women." Further, he told them that the giant retailer "devoted a lot of energy to it, but it doesn't appear the consumer has had any positive response."

This doesn't surprise me at all. A company that built so strong a brand epitomizing low prices and cost cutting is hardly going to change its reputation in a matter of a few years to that of a high-fashion merchandiser. It just makes no sense, behaviorally, to expect Wal-Mart's old customers to want it, and it's new, target customer segments to believe or trust it. And, worse, to believe that the latter group will think other people will believe it when seeing Wal-Mart brands on them.

Let's see- in the past year, Wal-Mart has struck out on fashion merchandise upscaling, entering more urban target markets, reaching out to non-black minority communities, and burnishing its image regarding the treatment of its employees. On the plus side, however, it is threatening to wreck the retail pharmacy/drugstore sector.

However, I doubt that the latter success will offset the other gaffes. Guess it's back to the drawing board for Wal-Mart, to determine what will bring profitable growth and, ultimately, consistently superior total returns for its shareholders. Will Lee Scott weather the coming storm?