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

Reuters

ROMEOVILLE, Ill., Oct 11 (Reuters) - Sam's Club is trying tostand out against its larger, faster-growing rival CostcoWholesale Corp with trendier holiday merchandise thisyear, hoping that new goods will spur its members to spend more.

Its previous moves, including improving food and adding"treasure hunt" items such as $6,000 Cartier watches, havefailed to spur strong results. Sales and the growth trajectoryat the retail warehouse chain, part of Wal-Mart Stores Inc, continue to lag behind Costco.

"We've been underwhelming our members," Chief ExecutiveOfficer Rosalind Brewer said as she toured a new Sam's Club inRomeoville, Illinois, last week. Some goods just have not been"on trend" enough, she said.

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

The chain is adding 132 new general merchandise goods forthe holiday season, up from 56 a year ago. They includeeverything from sets of "heirloom" Christmas ornaments that looklike ones sold in boutiques, to women's UGG boots priced belowthe $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 mayhelp but could be more of an "incremental positive" rather thanreally moving the needle, he said, without seeing the goods.

Costco has not changed its holiday strategy and is keepingan eye on its rival, Chief Financial Officer Richard Galantisaid on Oct. 9. Sam's Club's discount booklets, launched monthsago, are similar to ones Costco has used for years.

"We are going to do what we do," Galanti said on aconference call. "If they keep doing it, it must be working."

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

"The results have not been consistently barn burning whileCostco's have," said Cowen & Co analyst Faye Landes. In thepast, Sam's Club's formula has not seemed to be "quite as naileddown as Costco's," she said.

Sam's Club, which has 627 warehouses in the United Statesand Puerto Rico and is opening 15 to 20 more a year, declined toforecast sales or profit margins on the new items. Costco runs638 warehouses, including 454 in the United States and PuertoRico, 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. Itis the only club to sell Apple Inc devices and alsostocks items such as The North Face fleece jackets from VF Corp and Under Armour Inc shirts.

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

"I haven't really found anything that would draw me in" tomake many impulse purchases, said Skeer, who lives in GraniteBay, California.

View Comments