Sam’s Club to expand fresh foods

10/13/2010 11:42:57 AM
Bruce Blythe

Sam’s Club, the warehouse chain owned by Wal-Mart Stores, Inc., said it will post better-than-expected sales during the

current quarter as the company steps up fresh food offerings.

Comparable-store sales for the quarter ending this month will rise an estimated 1-3% compared with the same period a year earlier, Brian Cornell, chief executive officer of Sam’s Club, said during an investor meeting today. In August, the company projected sales to be unchanged to up 2%.

Clubs stores have expanded their food departments in recent years, representing a growth market for the fresh produce industry as traditional grocery chains struggled with the weak economy. A year ago, Wal-Mart said it would remodel about a fourth of its nearly 600 U.S. Sam’s Clubs locations, increasing space for fresh produce and meat as well as beauty and health products and over-the-counter drugs.

As of August, Wal-Mart had completed remodeling projects on 33 stores and another 16 were under construction, Cornell said previously. Sam’s Club expects to have remodeling completed at 65 stores this year and another 60 to 70 next year, the company said today.

During today’s meeting near Wal-Mart’s Bentonville, Ark., headquarters, company executives said Sam’s Club planned to introduce about 100 new fresh food items this fall. Aside from recent a roll-out of Angus beef, the executives didn’t list specific food items.

“We have to expand our fresh footprint,” Cornell said today.

Also today, Wal-Mart chief executive officer Mike Duke said he expects the retailer overall to post positive comparable sales in the fourth quarter. Wal-Mart has posted five consecutive quarterly comparable-store sales declines amid competition from other discounters and a weak economy that’s squeezed the company’s core, lower- to middle-income customers.

Club stores charge annual membership fees for access to bulk, discounted goods. While Sam’s Club has more U.S. stores than any other club store operator, it lags behind Costco Wholesale Corp. in sales. In Costco’s fiscal 2010 third quarter, sales rose 12% to $17.4 billion. Sam’s Club sales rose 2.2% to $12.5 billion in the company’s most recent quarter.

In the quarter ended July 31, Sam’s Club posted a 1% comparable-store sales increase, excluding fuel. Comparable-store sales typically reflect stores open at least a year and are a widely-followed measure of retailer performance.

In addition to the Sam’s Club remodeling, Wal-Mart is ramping up expansion in large U.S. cities, such as Chicago, with plans to add smaller-format neighborhood stores offering fresh foods to prop up sagging sales.

During a September analyst conference, Bill Simon, chief executive officer of Wal-Mart’s U.S. operations, said the retailer must be more creative with its store formats as the company expands beyond rural and suburban areas into denser urban markets.

Wal-Mart will have “a healthy mix” of supercenters and smaller stores, including grocery and neighborhood market formats, Simon said.

Fruits, vegetables and other fresh foods are expected to be a key part of the urban expansion.

“The majority of our stores today include a full grocery offering,” Wal-Mart spokesman Steven Restivo said in September. “It’s an area that customers have come to expect from Wal-Mart, and it’s an area where we can save customers a lot of money. In cities across the country, residents want more options for affordable, healthy food, and we want to be part of the solution in as many cases as we can.”

Wal-Mart was expected to provide additional details on its urban expansion plans at the meeting today.



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