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Walmart Streamlines Stores, Disappoints Suppliers

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Walmart store front

The world’s largest retailer is hoping to sell more by stocking less.

Walmart has nixed about 15 perfect of store displays over the past year and the average supercenter carries about 2,500 fewer items than a year ago, according to The Wall Street Journal.

The reason: The Bentonville, Arkansas-based company wants to “organize unruly systems for managing inventory and keep stores neat and better stocked,” which it hopes will help improve profits.

To do so, the retailer is cutting back on inventory, dropping some underperforming products altogether and adding to areas that are growing, like fresh produce. “These are not willy-nilly decisions, these are decisions being driven by customer behavior,” Walmart spokeswoman Deisha Barnett told the Journal.

That doesn’t mean store shelves will be empty: Greg Foran, the retail chain’s U.S. chief executive, plans to more than double the width of aisles to make it easier for multiple carts to maneuver.

While Walmart’s shift is still in its infancy, it’s already having an impact. Inventory increased 2.2 percent in the latest quarter, compared to the year-ago period, while sales grew 4.8 percent.

“It’s the objective of every retailer to grow their inventory slower than sales,” Foran said. “We just carry too much inventory. And we carry too much inventory across most parts of the box. And so we do have lots of work under way to get that sorted.”

Decluttering stores isn’t the only step Walmart is taking to streamline its business. Earlier this year the retailer announced plans to amend payment terms and charge storage fees to around 10,000 of its suppliers, citing a need to bring “consistency to the collection of allowances related to the growth of our business and suppliers’ use of the Walmart supply network.”

One of the biggest changes under the new terms is the payment schedule, which will be determined by how quickly a supplier’s inventory moves.

At least two suppliers with well-known brands have refused to accept the terms; others are worried they will lose tens of millions of dollars in sales and be forced to raise prices.

Speaking at Walmart’s 22nd annual investors meeting earlier this month, executives forecast a fall in earnings per share of between 6 and 12 percent in fiscal 2017—an announcement that sent its stock spiraling by nearly 9 percent.

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