Wal Mart : No plans for sister Sam

No Plans for sister Sam

almart (NYSE: WMT) has been experiencing constant growth but the same can’t be said for its discount operation Sam’s Club. After two years of almost 5% in growth, Sam’s Club sales are going down. In just the last year, they shrank down 1.4% reveals the latest annual report.

While Walmart continues to go along with gusto, we’re left wondering what is going to happen to the sister company and it seems Walmart is too. There doesn’t seem to be too much of a plan in place to turn the discount club around. In the released annual report, there is mention of cutting inventory and eliminating ‘non-value added activities’ in an effort to cut costs. Specifically, the activities that are not instrumental in bring in new profits will go. Walmart tried reducing inventory but it wasn’t successful and it’s possible the same tactic could backfire for Sam’s Club as well. Walmart has fought back to improve profits but Sam’s hasn’t had the same luck.

There is talk of an investment of capital into remodeling stores. This may help lure more customers into the store but with an already basic warehouse format, customers aren’t expecting much in terms of upgrades so sales may not be affected by the changes. As of now, Sam’s is not planning to add any more stores in the US. Last year, Sam’s closed 10 units. Currently there are only five to ten new locations planned for 2010 bringing the total to under 600 stores. Sam’s Club competitor, the discount warehouse Costco (NASDAQ:COST) had sales rise 8% in 6 months. They have 575 locations but it is forecasted that Costco will bypass Sam’s in store count soon enough.

It seems during the down economy, Walmart is pleased to promote discounts to shoppers but have essentially dropped the ball on giving shoppers a reason to pay for a membership to shop at Sam’s because consumers can just as easily go to Walmart for much of the same merchandise at low process. Sam’s currently represents under 12% of the total sales for Walmart. The Walmart corporation is also planning a huge expansion overseas in 2010 with the establishment of 600 new stores. While Walmart will benefit regardless, Sam’s sales and growth potential seem to be at a standstill.