Wal-Mart Stores Inc. (WMT), the world’s largest retailer, is closing its New York apparel office as it works to reduce costs and focus on more basic clothing.
The office on Broadway between 37th and 38th Streets opened in 2009 and has about 275 employees handling functions including product development and buying for Bentonville, Arkansas-based Wal-Mart. Those functions will be transferred to offices in the company’s hometown by Feb. 1, Wal-Mart said in a memo obtained by Bloomberg News.
U.S. Chief Executive Officer Bill Simon is focusing on basic apparel after attempts to appeal to more fashion-focused shoppers failed. Wal-Mart told investors this month that purchases of items such as socks, jeans and underwear were improving while overall comparable-store clothing sales still were declining.
“We don’t need to be on Broadway to sell socks and underwear and T-shirts,” David Tovar, a Wal-Mart spokesman, said today in an interview.
Senior Vice President Lisa Rhodes, who currently heads the apparel business, will leave in July after a transition period, Tovar said. Wal-Mart promoted executives Jeff Evans and Marybeth Cornwell to run portions of the unit after Rhodes leaves.
“We have been working on this strategy the past year and our customers are responding,” Andy Barron, Wal-Mart’s executive vice president overseeing apparel and home goods in the U.S., said in the memo. “Our sales trend in apparel is the best it’s been in two years.”
Rhodes was the unit’s third leader in the past five years. Segment chief Dottie Mattison resigned in July 2010 as her push for more colorful items and exclusive brands, including one from pop star Miley Cyrus, failed to lift sales.
Her predecessor, Claire Watts, left in 2007 after failing to make Wal-Mart’s apparel appeal to fashion-focused shoppers with ads in Vogue magazine and new lines like Metro 7.
Apparel accounted for 7 percent of the $260.3 billion in sales at U.S. Wal-Mart stores last year, down from 8 percent the previous year, according to company filings. Sales at U.S. Wal- Mart stores open at least a year have declined for 9 straight quarters.
Shoppers are buying less clothing at Wal-Mart than they used to, according to a survey of 1,500 people from New York- based consulting and research firm WSL Strategic Retail.
‘Continue to Struggle’
“Wal-Mart’s core shoppers just have less to spend and are not buying as many clothes,” Wendy Liebmann, chief executive officer of WSL, said in a telephone interview. “Wal-Mart will continue to struggle with that.”
Wal-Mart is also losing apparel sales to Target Corp. (TGT) and Kohl’s Corp. (KSS), said Les Berglass, CEO of Berglass+Associates, a New York executive-search firm that specializes in retail and apparel. Target introduced a line of clothing from Italian designer Missoni in September and had so much demand on the first day that its website crashed.
“Wal-Mart hasn’t invested in infrastructure and talent the way their competitors have,” Berglass said in a phone interview. “Target’s recent incredible success with their debut of clothing from Italian knitwear designer Missoni is an example.”
Back to Bentonville
Wal-Mart will try to find jobs for all of the displaced employees in Bentonville, Tovar said. He didn’t say how many are expected to make the move.
Less than half of the 275 New York employees will likely move to Arkansas, said Cameron Smith, president of an eponymous recruiting firm that works with Wal-Mart’s suppliers in Bentonville. He based his estimate on the number of employees who opted not to move to New York in 2009.
“I would expect a similar response now,” he said in an interview. “Wal-Mart filled these jobs with apparel people who likely will not want to leave the apparel hub of the U.S. But it won’t affect Wal-Mart at all. They have enough headcount to replenish those jobs.”
Smith also said apparel vendors may re-open offices in Bentonville that were shut in 2009. About 125 vendors including jeans maker Jordache closed their doors that year.
“I am getting calls from vendors this morning asking about staffing and office space,” Smith said. “Our office is rocking.”
Wal-Mart rose 1.2 percent to $57.37 at 4:15 p.m. in New York. The shares have gained 6.4 percent this year.
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