October 11, 2013 / 9:22 PM / 5 years ago

Sam's Club bets new merchandise will make customers buy more

ROMEOVILLE, Illinois (Reuters) - Sam’s Club is trying to stand out against its larger, faster-growing rival Costco Wholesale Corp (COST.O) with trendier holiday merchandise this year, hoping that new goods will spur its members to spend more.

The Sam's Club logo is seen at a store in Bentonville, Arkansas on June 2, 2011. REUTERS/Sarah Conard

Its previous moves, including improving food and adding “treasure hunt” items such as $6,000 Cartier watches, have failed to spur strong results. Sales and the growth trajectory at the retail warehouse chain, part of Wal-Mart Stores Inc (WMT.N), continue to lag behind Costco.

“We’ve been underwhelming our members,” Chief Executive Officer Rosalind Brewer said as she toured a new Sam’s Club in Romeoville, Illinois, last week. Some goods just have not been “on trend” enough, she said.

When Wal-Mart meets with analysts and investors on October 15, Brewer will give more details about the merchandising strategy for Sam’s Club, a membership-only retailer.

The chain is adding 132 new general merchandise goods for the holiday season, up from 56 a year ago. They include everything from sets of “heirloom” Christmas ornaments that look like ones sold in boutiques, to women’s UGG boots priced below the $200 or more they sell for at department stores.

Sam’s Club has lacked a bit of the “flair” that Costco has, said Wolfe Research analyst Scott Mushkin. Adding new items may help but could be more of an “incremental positive” rather than really moving the needle, he said, without seeing the goods.

Costco has not changed its holiday strategy and is keeping an eye on its rival, Chief Financial Officer Richard Galanti said on October 9. Sam’s Club’s discount booklets, launched months ago, are similar to ones Costco has used for years.

“We are going to do what we do,” Galanti said on a conference call. “If they keep doing it, it must be working.”

Sales at stores open at least a year, a retail metric known as same-store sales, show that Costco has an edge. Costco’s U.S. same-store sales rose 5 percent last quarter. Sam’s Club’s same-store sales rose 1.7 percent last quarter and it expects them to be flat to up 2 percent this quarter.

“The results have not been consistently barn burning while Costco’s have,” said Cowen & Co analyst Faye Landes. In the past, Sam’s Club’s formula has not seemed to be “quite as nailed down as Costco’s,” she said.

Sam’s Club, which has 627 warehouses in the United States and Puerto Rico and is opening 15 to 20 more a year, declined to forecast sales or profit margins on the new items. Costco runs 638 warehouses, including 454 in the United States and Puerto Rico, and plans to open 18 more U.S. ones this fiscal year.

Sam’s Club, which got its start in Oklahoma 30 years ago, has been trying to stand out as a warehouse of brand names. It is the only club to sell Apple Inc (AAPL.O) devices and also stocks items such as The North Face fleece jackets from VF Corp (VFC.N) and Under Armour Inc (UA.N) shirts.

It hopes to lure members like Sue Skeer to spend more. Skeer said she joined Sam’s Club 16 years ago and goes there about twice a week, mainly to buy fruits and vegetables.

“I haven’t really found anything that would draw me in” to make many impulse purchases, said Skeer, who lives in Granite Bay, California.

Reporting by Jessica Wohl; editing by Andrew Hay

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