Wal-Mart Plans to Reduce Space for Electronics in Stores

Wal-Mart Stores Inc. (WMT), the world’s biggest retailer, plans to cut back on space for electronics as sales in that category have declined, contributing to the company’s two-year U.S. sales slump.

The company, which is based in Bentonville, Arkansas, will reduce the floor space devoted to items like flat-screen televisions and give some of that space to apparel, according to Rosalind Brewer, who runs the Wal-Mart East division. Brewer spoke at a retail conference in Atlanta today.

The reduction is a reversal of Wal-Mart’s 2009 move to allocate 21 percent more floor space to entertainment gadgets and comes after electronics contributed to a 1.8 percent decline in sales at U.S. stores open at least a year in the fourth quarter, its seventh consecutive drop.

“It’s something Wal-Mart has needed to do for a year,” said Craig Johnson, president of Customer Growth Partners, a New Canaan, Connecticut-based consulting firm, in an interview. “You don’t need as much space in that area with products shrinking and purchases going online, and electronics has narrow profit margins. Floor space is a scarce commodity.”

At an investor conference last month, Wal-Mart’s U.S. chief Bill Simon said “we couldn’t possibly sell enough TVs,” during the holiday season to justify the space allotted to electronics. In February, Simon cited electronics as the “primary factor” for the company’s negative comparable-store sales result.

Best Buy, Amazon

David Strasser, an analyst at Janney Montgomery Scott LLC, said in a report today that Wal-Mart could reduce the electronics section by about 2,000 square feet per store. The New York-based analyst recommends buying the shares. Greg Rossiter, a company spokesman, said the space reductions will vary by store.

Retailers like Wal-Mart and Best Buy Co., the world’s largest consumer electronics retailer, have seen slowing sales of gadgets amid heightened competition from online retailers like Amazon.com Inc. Best Buy also is reducing the number of items it sells to focus on products that sell well, executives have said.

Brewer, who oversees about 1,600 stores, also said that Wal-Mart will resume sales of fabric and crafts products. Yesterday, the retailer said it was restoring 8,500 products to store shelves and kicking off an ad campaign in a bid to lift sales.

Wal-Mart rose 70 cents, or 1.3 percent, to $53.52 at 4:00 p.m. in New York Stock Exchange composite trading. The shares have fallen almost one percent this year.

To contact the reporter on this story: Matthew Boyle in New York at mboyle20@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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