Business

Wal-Mart reaches ‘line in sand’ moment in push to fix stores

For months, a digital clock has counted relentlessly down – minutes, hours, days – inside the headquarters of Wal-Mart Stores Inc.

The timer was set up after Greg Foran, head of the company’s U.S. operations, made Oct. 1 a “line in the sand” for transforming Wal-Mart into a cleaner, easier and friendlier place to shop. The 54-year-old executive has crisscrossed the country visiting stores, trying to bring them up to par.

The clock hit zero on Thursday – and Foran is still at work.

While many Wal-Mart locations are now in better shape, some are lagging behind. And Foran is continuing his torrid pace of surprise visits, aiming to spot problems in the sprawling chain of 4,600 U.S. stores. Wal-Mart has made progress on its key priorities – making checkout lines shorter, for instance – but the company is still pushing to bring costs lower and improve efficiency.

In that vein, Wal-Mart said on Friday that it was cutting 450 workers at its headquarters.

“While difficult, I believe these changes will help us become a more nimble organization that serves customers better,” Chief Executive Officer Doug McMillon said in a memo to employees. “Our customers are changing, retail is changing, and we must change.”

At stake is Wal-Mart’s legacy as the king of discount chains, a reputation built on Sam Walton’s nonstop pursuit of lower prices. The Bentonville, Arkansas-based company had drifted away from Walton’s ideals in recent years, allowing costs to increase while its standards slipped, executives have said. Wal-Mart also faces fiercer Amazon.com competition, a stock slump and a broader slowdown in big-box retail.

Foran’s crusade to improve Wal-Mart’s tarnished reputation has sent him on visits to more than 150 stores in 30 states over the past year. He’s studied everything from how easy it is to get a shopping cart to how individual items are placed on the shelves – things customers often aren’t paying attention to but can contribute to their overall impressions.

“Maybe they are not ubiquitously achieving their goals across the U.S., but it is certainly a significant improvement,” said Burt Flickinger, managing director at Strategic Resource Group, a consulting firm that visits about 50 to 100 Wal-Mart stores a month.

The Oct. 1 milestone was a way for Foran to bring urgency to Wal-Mart’s stores as they head into the holiday season – the first one since McMillon put his turnaround plan into place earlier this year. The holidays can make or break a retailer’s year, and Wal-Mart is in much need of a boost. Earnings fell short of analysts’ estimates last quarter, and the company trimmed its forecast for the year. Wal-Mart’s stock has lost more than a quarter of its value in 2015.

Wal-Mart executives have admitted that the retail giant lost its way. Once seemingly unstoppable, the company has watched customers defect to Amazon, dollar-store chains, and regional grocery stores such as Kroger Co. and Publix Super Markets Inc.

Wal-Mart shoppers have complained that the stores were dirty, the shelves were empty, and the prices weren’t as competitive as they once were. The goal over the past year was straightforward: Stores should be tidy, staff should be friendly, and customers should be able to get in and get out quickly.

Wal-Mart still has a ways to go, especially with its grocery business, which makes up more than half of its nearly $500 billion in annual revenue, said Wayne Hood, an analyst at BMO Capital Markets.

Wal-Mart trails its supermarket peers in customer satisfaction because of poor service, the inconvenience of its large stores and the condition of produce, Hood said in a research report last month. To grow, Wal-Mart can’t just match its competitors – it will need to do even better, he said.

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