Wal-Mart (WMT) Going Local

By: Todd Sullivan Friday, May 23, 2008 2:40 PM

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Wal-Mart (WMT), already on the top of consumer's minds when it comes to prices, is now trying to get there for specialty items also.

Once again Wal-Mart is ahead of the game. Wisely retreating from the previous gang busters growth strategy and already the low cost leader, this is a fantastic way to draw in more shoppers to its existing locations.

Now the first thing that people will say it that this will hurt margins. Well, yes and no. While the small number of specialty items that will be sold may be done at a lower margin, the additional sales of other items will lead to overall ales increases.

At the end of the day, isn't that what matters? By no means are the specialty items going to be sold as "loss leaders" so even at a lower margin , they will still be profitable. Now add in the additional milk, toilet paper and other ancillary items people going there will pick up rather than making an additional trip and you have the making of another win for Wal-Mart.

Better still is that they are ahead of the competition like Target (TGT) in the implementation of it.

Disclosure ("none" means no position):Long WMT, none

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