Wal-Mart Not Apologizing For Toy Success

Feb 20, 2004

By George Anderson

Wal-Mart had an incredible holiday season selling toys and the company’s chief executive and president, Lee Scott, sees no reason to feel bad for those retailers who were not
so successful.

Mr. Scott told Reuters, toys are “a very profitable category for Wal-Mart with a very strong gross margin. We’re very encouraged about toys and our positioning in that
particular market … I’m excited. I don’t feel particularly compelled to apologize for it.”

Although criticized by some for using toys as a loss leader, others say Wal-Mart’s approach to the category isn’t about giving up margins to suck in consumers.

“Wal-Mart is paying less year over year to purchase similar toy products,” said Richard Hastings, a retail analyst with Bernard Sands, a New York retail industry consultant.
“Wal-Mart is able to buy goods at such a low price, and its global sourcing and higher precision keep it buying the right amount of the right products. This keeps gross profit
margin in a zone everybody likes.”

Moderator’s Comment: Does Wal-Mart’s pricing or other business practices represent anti-competitive

We’ve heard it said on a number of occasions in the past year, only half-jokingly, that it may be time to think about busting up Wal-Mart.

We have serious doubts about that ever happening, but find the thought interesting, considering the number of companies citing Wal-Mart as the reason behind
the corporate action of the day (labor negotiations, Chapter 11 filing, etc.).
Anderson – Moderator

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