Sales are up, as budget-minded consumers lured by cheap groceries make the retailer's stores their one-stop shopping choiceTwenty years ago Wal-Mart Stores (WMT) launched the first step in what would turn out to be an aggressive move into the grocery food business. It was a calculated bet that the chain could extend its low-price formula beyond general merchandise. The thinking at headquarters in Bentonville, Ark., was that customers would flock in to buy food at everyday low prices and then stay to buy everything else for the household, from Tide detergent to Hanes boxer shorts.
It turned out to be a brilliant strategy. In recent years, as Wal-Mart grew into the world's largest and most powerful retailer, executives there have sometimes seemed to be grasping for new ways to grow, such as moving into high-fashion apparel, a strategy that failed spectacularly, sending sales into negative territory. But as the U.S. economy flounders and Americans are looking for bargains that will stretch every dollar, Wal-Mart's food aisles are thronged yet again.
That was apparent in Wal-Mart's February results, released on Mar. 6. Sales at stores open at least one year rose 2.6%, mostly from growth in groceries. That may not sound like a lot, but 2.6% growth is quite a feat today, given that many retailers are struggling to post any sales gains at all as consumers cut back. Rival Target's (TGT) sales for the same period, for instance, grew a mere 0.5%. "There are a few daily and weekly purchases like food that consumers have to make, regardless of how the economy is performing," says Frank Badillo, senior economist at researcher TNS Retail Forward.
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