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Wal-Mart’s Grocery Growth Flattens

BENTONVILLE, Ark. — Grocery product and other consumables remained flat at 55% of sales at Walmart U.S. in the most recent fiscal year, the company said in a filing with the Securities and Exchange Commission last week.

The news came amid a slew of reports indicating that the retail giant has been understaffing its stores, leading to more out-of-stocks and reduced service levels.

“When a company needs to cut costs, the easiest thing to cut back on is labor, but that produces a lot of other problems, like keeping the shelves filled and the product rotated,” said Ed Odron, a former supermarket executive who now runs his own consulting firm, Ed Odron Produce Marketing and Services, in Morada, Calif.


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According to reports, Wal-Mart cut back on store-level staffing a few years ago when it reduced its assortment, but then failed to restore staff when it returned items to the shelves amid consumer backlash over missing items.

The company could not be reached for comment last week.

In its annual 10-K annual report to shareholders, Wal-Mart Stores said the grocery and consumables category — which also includes such nonfood categories as floral, HBC, baby products, household chemicals, paper goods and pet supplies — totaled 55% of U.S. sales (not including Sam’s Club) in fiscal 2013, which ended in January. That indicates grocery and consumables sales of about $151 billion, vs. $145.3 billion in fiscal 2012.

In the preceding three years, grocery sales had been rising by about two percentage points as a percent of sales each year as the company aggressively rolled out supercenters and converted discount stores to the supercenter format offering a full array of groceries.

Now the company has slowed its supercenter development, although it is continuing to roll out its smaller, but more grocery-focused Neighborhood Market stores at an aggressive pace.

Read more: Wal-Mart's U.S. Comps Rise 1% in Q4

Odron said he believes that some of the better-run ethnic independent chains have been taking a share of Wal-Mart’s grocery volume as they themselves have expanded. In addition, he said many traditional supermarket operators seem to be able to bounce back more quickly than they used to from the impact of new Walmarts in their markets. In the West, he noted that Boise, Idaho-based WinCo Foods, in particular, has been a formidable competitor for Wal-Mart.

“The world has changed,” he said. “Wal-Mart needs to take a good look at themselves, because whatever they did yesterday, and what they doing today is not going to work as well for them in the future.”

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