Wal-Mart will shutter its fashion office in Manhattan less than three years after arriving as the retailer shifts its focus back to basic items like socks and jeans, and away from trendier lines of clothing seen at its stores in recent years.
There are 275 people working at the office, set to close on Feb. 1, and spokesman Dave Tovar said Wal-Mart will relocate as many of them as possible to the company headquarters in Bentonville, Ark. The company began speaking with employees in New York early Wednesday, he said.
The senior vice president of Wal-Mart's U.S. apparel merchandising division, Lisa Rhodes, will stay on through the transition and leave in July. The company promoted executives Jeff Evans and Marybeth Cornwell to run parts of the division after she's gone.
"Our focus is on jeans, T-shirts, socks and underwear," Tovar said. "We believe that the strategy is working. We didn't need to have an office in Manhattan."
The fashion office was opened in early 2009 in the heart of the garment district as part of Wal-Mart's goal strategy to follow fashion trends more closely. Located on Broadway, between 37th and 38th Streets, the staff assumed a range of duties including buying, product development and design.
But shoppers didn't buy the trendier mix of clothing. The strategy is part of a broader overhaul to fix mistakes it made in pricing and merchandising to reverse nine straight quarters of declines in revenue at stores opened at least a year. The company is going back to "everyday low prices", rather than slashing prices on select items. It's also finishing up restoring products it culled during an overzealous bid to clean up its stores.
Same-store sales are a key barometer of a retailer's health and Wal-Mart, the world's largest retailer, could see a reversal of its same-store losing streak in the third quarter, which ends this month. The company told investors in early October it has seen three straight months of revenue gains starting in July. Third-quarter results will be released Nov. 15.
Clothing, which accounts for 7 percent of the company's total sales of nearly $419 billion, has been one of the most challenging areas for Wal-Mart, but with a move back to the basics, the section has recently shown some signs of improvement. According to a memo sent to Wal-Mart associates on Wednesday, the sales trend in clothing has been the "best it's been in two years."
In the memo, given to a reporter by Wal-Mart, about 40 percent of its clothing planning, replenishment and modular execution associates are already based in Bentonville, Ark.
"It just makes sense to unite our apparel efforts in one location," wrote Andy Barron, executive vice president of clothing and home furnishings for the Wal-Mart's U.S. division in the memo.