Wal-Mart brings back gun sales
The move is just the latest sign that executives are returning to the company's roots after recent failed efforts to appear more upscale.
By InvestorPlace on Fri, Apr 29, 2011 8:19 AM
By Jeff Reeves, editor of InvestorPlace.com
Wal-Mart (WMT) may be the world's biggest retailer, but that doesn't mean it has given up on growing. From planned grocery deliveries to inner-city residents to its recent purchase of a social-media company, there always seems to be something new in store.
The latest news, according to The Wall Street Journal, is that Wal-Mart will reload gun sales by cutting back on electronics floor space to make room for rifles, shotguns and ammunition at hundreds of U.S. stores.
But unlike previous failed efforts and some recent quirky initiatives, the return of guns and ammo is a return to Wal-Mart's roots -- something the company may sorely need.
Before you go making gun sales at Wal-Mart a political issue, remember that the bottom line is always the bottom line for the King of Retail. And that bottom line hasn't been very impressive lately. The company's stock is down slightly over the past 12 months, while the S&P 500 has tacked on 11%. This is no surprise, given seven straight quarters of same-store-sales declines in the U.S.
Wal-Mart stopped selling guns and ammo at most of its U.S. stores five years ago but is now stocking up on firearms and nearly half of its 3,600 U.S. locations. Spin doctors at the corporation claim this is part of a larger focus on "heritage categories" -- fishing rods and bolts of sewing fabric that were cut out of aisles as the discounter tried to appear more upscale.
Upscale obviously didn't work. A few of years ago, Wal-Mart eliminated thousands of items to de-clutter its stores, but it suffered more customer complaints than anything else. In September, managers made an about-face and began restocking the shelves as Wal-Mart added thousands of new products. And just a few weeks ago, it announced an ad campaign in which Wal-Mart reasserts its low-price roots. That, essentially, leaves the company right back where it started a few years ago.
That isn't a very heartening sign for shareholders. After all, businesses are meant to grow and seize more opportunities, not just put it in neutral.
But in Wal-Mart's case, it may be wise to simplify and return to the mission that made this store a retail powerhouse. Sprawling rural and suburban SuperCenters offering guns and ammo and cheap clothes, food and furnishings made the franchise what it is today. Why tinker with the model if it was so darn profitable?
In Wal-Mart's case, a return to previous business success could be the best move, especially after some new ideas that have fallen flat.