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Sam's Club CEO: small businesses are more cautious

Anne d'Innocenzio, AP Retail Writer

ROGERS, ARK (AP) -- The CEO of Wal-Mart's Sam's Club division said Thursday that its small business members are so frugal they're ordering items, from tomato sauce to paper cups, that they need for the next day or that night.

"They're really being very cautious. They're playing it close to the vest," said Rosalind Brewer, president and CEO of Wal-Mart's wholesale club division, which represents about 12 percent of the company's overall sales of $466.1 billion. "They're acting just like consumers."

Brewer, speaking at a media gathering in Rogers, Ark., the day before the world's largest retailer's annual shareholders' meeting, said that she started seeing the trend of a broad base of small businesses buying day-to-day late last year. She noted that the frugal behavior among small business owners is even worse than she saw in 2008, the depths of the Great Recession.

A number of factors are making Sam's Club's small business owners more frugal, from competition from dollar-store chains to uncertainty about health care costs and tax changes, Brewer said. She pointed out that convenience stores are facing big challenges because dollar-store chains now sell tobacco products, which are key sales drivers.

The comments underscore how even three years after the recession has officially ended, small business owners, which are a key generator of jobs, are faced with ongoing challenges and new financial worries.

Todd Harbaugh, executive vice president of operations at Sam's Club, told reporters that he has seen restaurants using revenue from lunch to pay for food and supplies needed for that night's dinner.

"They're living from meal to meal," he said.

Sam's Club, which generated $56 billion in sales in the year ended Jan. 31, 2013 and operates more than 600 stores, has seen slower growth in the last few quarters. The division reported that revenue at stores opened at least a year rose just 0.2 percent in the first quarter, a slowdown from the 2.3 percent pace in the fourth quarter and a 2.7 percent increase in the third quarter. That measure is a key indicator of a retailer's health.

Brewer said that the company is working hard to lower prices on items and is looking for other ways to help out its members.