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2012 could be the year (finally) for apparel sales improvement

It seems like forever that that Walmart has been describing the performance of its apparel department as “a work in progress,” but this could be the year things turn around thanks to a number of factors working in the company’s favor.

For starters, the return to basics emphasis is giving Walmart customers what they want and expect from Walmart, just as the market for apparel is enjoying strength and disruption at a competitor is creating the potential for share gains.

“Our apparel business, we’ve been working on for quite some time,” Duncan Mac Naughton, Walmart’s chief merchandising officer said earlier this week at an investor conference. For the past 18 months, the company has worked with suppliers to improve quality and re-allocate space in stores to emphasize basics and fashion basics. “Fifty percent of our sales will come from basic items. And when I say basic, I mean underwear, socks and denim. It is that simple. And that is what the customer wants from us, that is what they expect from us.”

In terms of fashion, the company is keeping it simple with items described as fashion basics, such as a polo shirt with a stripe, expected to account for 40% of sales with only about 10% of sales coming from trendier products in the missies and juniors areas.

“Our customers want basic and they want quality and we will deliver it,” Mac Naughton said.

If the strategy is effective, Walmart could be positioned to gain share in a U.S. apparel market that grew by 4% last year to $199 billion, according to NPD. The firm said last year’s increase in dollar sales in the men’s apparel market led the way in the adult apparel market with an increase of 4%, while women’s apparel grew by 3% and children’s apparel by 6%.

“This is a marked improvement over the prior years,” said Marshal Cohen, NPD’s chief industry analyst. “I believe this is testament to the use of sales and value pricing by retailers that did in fact get the consumer to respond. I think this also goes back to the ‘frugal fatigue’ phenomenon we have been watching. It seems to have materialized for apparel in 2011 as consumers finally got back to building their wardrobes again.”

The wardrobe building phenomenon doesn’t necessarily align with Walmart’s basic focus and Cohen described some other marketplace factors that represent head winds for Walmart. For example, dresses grew at double digits, and women’s intimate apparel increased by 6%. In men’s, dressy categories drove growth, although the underwear category did increase by 7%.

Which stores benefited from the increase in apparel sales?  Manufacturer-owned stores, posted the highest growth rate, up 15%, off-price and specialty stores were both up 6%, according to NPD. Department and national chain stores also posted growth of 3%, while the mass channel increased 1%.

“These channel results demonstrate that the consumer’s pursuit of value has become more about ‘brand names for less,’ and less about getting the ‘lowest prices,’” observed Cohen, “Stores and brands that have shifted with the consumer and provide an assortment of recognizable brands, a good deal, and better quality merchandise as well as having shifted away from being only about the lowest price, are the ones that have posted growth.”

Sales of apparel and accessories at Walmart decline substantially last year, according to the company’s annual report. In 2011, sales of apparel and accessories accounted for 7% or $18.5 billion of total Walmart U.S. sales of $264.2 billion compared to the prior year when apparel and accessories accounted for 8% or $20.8 billion of total U.S. sales of $260.3 billion.

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