story by Kim Souza
The recent lackluster first quarter financials from Sam’s Club haven’t tarnished the image of CEO Rosalind Brewer who according to Wall Street’s Brian Sozzi, “shined on stage” at the retailer’s annual shareholder meeting.
Sozzi, CEO of Belus Capital Advisors, notes that Brewer’s 22 years at Kimberly Clark and her transition to Wal-Mart in 2006 to oversee 1,000 stores, to now infusing the tech revolution into Sam’s Club were primers for bigger things.
He also said Brewer may be on the short list of candidates to take over as CEO of Target. It’s a move that Sozzi said “would be a great fit given her appreciation of data, technology, supplier relationships, and experience in store operations.” Sozzi made those comments as an analyst for “The Street” while he was in Bentonville last week for Wal-Mart’s shareholder events.
Carol Spieckerman, CEO of NewMarketBuilders, doesn’t agree with Sozzi’s notion that Brewer is a good fit for the next Target CEO. If for no other reason, Spieckerman said Brewer still has an opportunity to make a big mark at Sam’s.
“Mindy Grossman, HSN’s CEO, would be a terrific choice for Target. … Her complete turnaround of HSN from an old school shopping network and into a full-fledged digital entertainment company is setting a standard for others to follow. Target could use her big picture, digital-first mojo right about now along with her ability to build multi-media brand programs that transcend ‘channel’ strategies. At the same time, her understanding of how to build mutually-beneficial brand partnerships and relationships is in complete alignment with Target’s values, which would make for a smooth start,” Spieckerman said.
Target held its annual shareholder meeting in Dallas on June 11. The Minneapolis-based retailer said it’s board continues to look for a visionary leader to move Target forward. The three goals outlined by the executives at the Target meeting include; Increase U.S. sales and traffic; Improve the Canadian operations; and Accelerate Target’s omnichannel presence.
Jason Long, CEO of St. Louis-based Shift Marketing Group, said he believes the worst is behind Target and whoever takes the reins will have a great opportunity to be part of an American turnaround story.
CHALLENGES / LEARNING
Brewer spoke to the media June 5 regarding the challenges and opportunities for growth that she and her management team see for Sam’s Club going forward.
“Sam’s Club is in the midst of a merchandise transformation, having the right merchandise is the most important work we can do to drive traffic in our clubs,” Brewer said. “The member experience is also migrating. It is different today than a year ago. We learned in the first quarter that convenience is what customers want today.”
Brewer told the media she wasn’t there to rehash the challenging first quarter results which disappointed Wall Street. For the first quarter ended April 30, Sam’s Club reported comp sales down 0.2%, while the average ticket down 0.3%. Net sales were $13.891 billion at Sam’s Club (including fuel), up just 0.1%.
Noting that the recent quarter was one of the most challenging in recent history, Brewer said the “combination of severe weather and the reduction of public assistance represented an approximate 90 basis point impact to comp sales.” That was enough to have turned comps positive at 1.1%, still well below the normal range for Sam’s Club.
While traffic and average ticket sales declined in the quarter, membership and other income grew 10.5%. This jump was related to the fee increase taken a year ago. Sam’s said new member signups were softer to start fiscal 2015.
Brewer said going forward the goal is build more value in the Sam’s Club membership, which is why the retailer just launched a cash rewards program on top of the coupon savings books that have been popular over the past year.
In fiscal 2014 Sam’s Club grew total sales to $57.2 billion, up $56.4 billion in the prior year. If it were a standalone company, Sam’s Club would be the eighth largest U.S. retailer based on sales revenue. Forbes notes that “Brewer is running a company that in size could stand toe-to-toe with Dow Chemical ($57 billion) and Caterpillar ($55 billion).”
Much of what Brewer shared during shareholders week highlighted Sam’s push to become an omnichannel – selling products through various methods – retailer.
She said the click-and-pull website program available to Sam’s Plus members is growing in popularity. Click and pull allows members to order their products online and then pick them up at their local Sam’s Club at their own convenience. The member drives up to the door and the goods are loaded into their vehicle. Sam’s highlighted one local member, restaurant owner “Catfish John” who faithfully uses click-and-pull program to save him time each day.
Wal-Mart CEO Doug McMillon also gave the program a plug when he addressed the media following the June 6 shareholders meeting. He said he used click and pull to stock up on soft drinks and Gatorade ahead of the Memorial Day weekend.
“Sam’s deserves credit for trying new things and experimenting with new member engagement ideas, particularly in the digital space however, it may be approaching a tipping point in which complexity will overtake everyday value perception. Various combinations of promotional programs, membership levels and time-sensitive savings offers require a vigilance on the part of members that can make Amazon seem like a straightforward choice by comparison,” Spieckerman said.
Sam’s Club also recently announced plans to develop more private label brands, something the retailer has avoided. Spieckerman said Costco is the undisputed leader when it comes to developing power brands in the warehouse club space and beyond.
“For Sam’s to attempt to go up against that strength at this stage wouldn’t make sense as a frontline strategy. Costco is still a store-centric retailer at the end of the day and that’s why any moves that Sam’s makes in the digital space will be resources well spent, particularly tying digital to physical,” she said.
Spieckerman suggested Wal-Mart integrate Sam’s Club into its tethering and anytime/anywhere availability vision.
“Why not make bulk items from Sam’s available for pick-up at a Walmart Express stores, for example? Wal-Mart is in the early stages of turning its physical scale into a killer omni-channel advantage over pure-play digital competitors. The same could hold true as it competes against smaller-footprint, single-format competitors like Costco,” Spieckerman said.