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Contributors: Douglas McIntyre Jon C. Ogg

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Saturday, October 07, 2006

Weekend Edition: Should Wal-Mart Close Some U.S. Stores? (WMT)(TGT)

Wal-Mart loves to cut costs. They have decided to make more employees part-time, in all probability to save costs of full-time worker benefits.

Wal-Mart might want to take another tack. With same-store sales figures revised down for September, it would appear that, at 1.3% same-store growth, the company's US operations are now growing less than the rate of inflation.

Wal-Mart has 3,800 stores in the US. Even with the company's effort to spiff up its offerings with more expensive clothing and electronics, the plan does not seem to be working.

A moderation in same-store sales is sometimes a sign that a retailer has too many stores or that some of the stores are too close to one another. Wal-Mart may have reached that point of saturation, at least in some regions. Same-store sales were not just poor in September. They have been below Target and that trend continues. Target's same-store sales rose 6.7% in Septmeber.

Shutting a few dozen stores may be the only solution to the same-store problem.

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