Walmart to Open Smaller Stores to Boost Sales

For the first time, the retail giant will more open smaller grocery and convenience stores instead of superstores.
6:45 | 07/08/14

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Transcript for Walmart to Open Smaller Stores to Boost Sales
Michelle Franzen in New York this Wall Street closes on Tuesday July 8 this historic stock. Today Wal-Mart making news on two fronts the president and CEO of Wal-Mart you asked some cold water on the nation's recovery. Saying it hasn't reached all levels and classes. At the same time the world's biggest retail chain is talking about major shifts in strategy. As the company adjusts to changing economic landscape here with all the details Rick Newman of Yahoo! finance. Good afternoon -- I'm Michelle in this economy when Wal-Mart talks people listen first let's discuss a Reuters interview with Bill Simon president and CEO of Wal-Mart US. -- I wasn't exactly upbeat. He says we've reached a point -- it's not get any better but it's not get any any worse at least for the middle class and down what do you make of that. If you -- to -- know who's really struggling in this economy follow what's happened happening with Wal-Mart. Bill -- said last year that Wal-Mart was being hurt by cutbacks in things like food stamps. An unemployment and that tells you that there's just still a lot of financial stress on the middle class and you what you might call the lower middle class I guess. And he's now saying that they're really not -- If they're really not seeing any improvement in sales in the -- in the last few months so we saw some pretty good job numbers the last few months forgetting back to almost 300000 new jobs per month that's a really good number. What is not. Improving very quickly though is income incomes are barely keeping up with inflation -- a lot of people say their income is leaving them falling behind inflation I think that is reflect -- Wal-Mart. People just are not spending as much money they're -- and very very care for the looking for the best deals they can get and the -- to some stores that are even cheaper than Wal-Mart these days. And -- it's not just that -- com it's the change in how they're spending their spending habits of course Simon also noted those changes. What do you make of it for the middle class. Yeah -- that mean there we all know about online shopping. This is this is just creating an earthquake in there -- physical retail establishment. And that's hitting even Wal-Mart -- -- the biggest and most powerful retail chain areas. Some more people are shopping online Wal-Mart is online as well but there are sort of a late comer. They clearly -- is far ahead as places like Amazon and they're starting to. They're starting to. Catch up to Amazon actually copy some the things Amazon is doing like daily deals. Other services like that. But Wal-Mart you know it's really committed to those huge stores that's a -- of real estate and you know the -- physical retail landscape is not the greatest place to be right now. Let's talk about that a little bit further the numbers -- seemed to back up those claims in May Wal-Mart reported a fifth straight quarter of declining US sales. And the Wall Street Journal reports that in order to adapt and survive Wal-Mart is focusing on a number of renovations. What are some of those. Well they're kind of getting away from the whole thing that they made their name on which is those huge superstores. You know one -- one of the things that's happening is this idea of destination shopping. It's just not something Americans seem to be buying into that much anymore -- -- she is Wal-Mart superstores. Tend to be in the suburbs or even in the distant suburbs or in rural areas. Well we've seen the last few years is a kind of a population shift away from the outer suburbs more people are moving towards cities. They're sort of moving away from hallmarks if you -- -- -- Wal-Mart is trying to do is get back to where people are so there. They have a strategy to develop a lot of smaller stores he's might be. 110 -- one. Fifth the size of one of their superstores the idea smaller stores closer to people say you don't have to. Make -- make a long run out to Wal-Mart and you know park half a mile away -- huge parking lot that kind of thing. They wanted to maybe have some things that look like convenience -- little bit more like neighborhood grocery stores may be a little bit more welcoming instead of that huge story that you can get -- -- So investors -- time happy with this strategy. But it's gonna take a -- to put in place so what that's what we need to see is some actual results from this strategy torch which we're not seeing yet. And in addition to some of those renovation ideas like the smaller stores and what about things that you still can't buy online such as gasoline. Well that's another big push. I Wal-Mart is to double down on the -- on the things that you as you said you can't get on line. It's it's that you can you also can't buy booze online in some states and Wal-Mart wants to get into -- And I think that's part of their part of their grocery. Strategy they do sell groceries in the superstores. But again fewer people going to those big destination sites they want to have more of a grocery presence close to where people live. And you know maybe try to elbow aside Amazon which is trying to even get into the business of delivering groceries and sort of everyday products so. There's a tonic competition in this space it's going to be interesting to watch I think it will actually be good for consumers because. The real the real necessity here for the retailers is to get closer to consumers and make sure consumers are feel like they're getting the best deal they can so. That's who might be the winner in this instance that was going to be. Next question on that couldn't balance all of this out for us by most benchmarks the US economy continues to slowly improved. Unemployment going down no inflation how to reconcile those statistics. With what Wal-Mart Tuesday. Well let's look at two things jobs are coming back and in fact we now have more jobs than we did during the peak prior to the recession and it sounds like well we finally got everything back that we lost. What has not come back our incomes and what that tells you is. People are getting rehired but a lot of people -- are not making as much money as they used to and when you look at. Median household -- com. It is it has fallen. Over the last decade or so and that's after you adjust for inflation so that tells you that the typical family. Is still in -- hall and they they feel like they're in a hole they're gloomy about it so we've seen consumer confidence creeping up month by month. But it is still not back to levels it was -- before the recession we've really got almost a whole new mindset toward work and getting ahead these days. A lot of people are still digging themselves out of -- hall and that is showing up in results at places like Wal-Mart. More people are shopping at dollar stores which are even cheaper than Wal-Mart so those stores are doing great but this is this shows you there's a lot of stress that remains in the economy. Rick Newman and Yahoo! finance thank you very much for breaking it down for -- And you've been watching stories -- stay with for your latest business headlines I'm Michelle Franzen -- New York.

This transcript has been automatically generated and may not be 100% accurate.

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