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Sam's Club Membership Income Growth Below Plan

Reuters
Wednesday, 24 Oct 2007 | 11:47 AM ET

Sam's Club, the warehouse division of Wal-Mart Stores, said Wednesday that its membership income growth was not meeting its expectations, and it may change its membership structure to attract more customers.

"Our income is continuing to grow, our membership income, but it's behind plan," said Doug McMillon, Sam's Club president and chief executive. "It's an area of focus for us right now because we would like to see better performance."

Steven Senne

He made the comments at the company's analyst meeting, which was broadcast over the Internet.

The Sam's Club presentation came a day after Wal-Mart scaled back on its plans to open new supercenters and reduced its capital spending forecast as it tries to boost sales at existing U.S. stores.

Customers pay a membership fee to shop at Sam's Club warehouses, which sell everything from office supplies to furniture to fresh food.

Sam's Club is the No. 2 U.S. warehouse operator behind Costco Wholesale, and in the past, it focused on serving small business customers rather than individual shoppers. But it has been trying to change that and attract more consumers to its clubs to improve sales.

"Small business alone is not enough," McMillon said. "We need to be able to serve both consumers ... and small business."

But McMillon said when it comes to signing up and renewing members, small business is outperforming consumer memberships, and the retailer may make changes to its membership structure to attract to a wider range of consumers.

He said that Sam's Club basically offers three annual membership fees -- $35, $40 and $100.

"Over time, I don't know that it necessarily has to be just three choices," he said, but added that it was "very early on" in the process, and he did not have any specifics to provide.

The company also said its Sam's Club Web site is becoming more popular, and new customer sign-ups and membership renewals are growing at a much faster rate online than in its clubs.

Company executives said Sam's Club will start allowing members to review merchandise online on Samsclub.com in the next several weeks.

This summer, Wal-Mart's Web site, Walmart.com, began letting shoppers review the merchandise sold on the site. A growing number of Web sites, including Amazon.com, allow users to post merchandise critiques and the reviews are seen as a way to increase shopper loyalty and encourage consumers to return to a Web site more often.

The retailer also said that it was "comfortable at the moment" with its "100 percent satisfaction guarantee" return policy in its electronics business, and it does not see a reason at this point to change that policy.

Earlier this year, in an effort to improve margins, Costco implemented a 90-day return policy on consumer electronics like advanced televisions and laptop computers to cut down on customers returning old items after purchasing newer models.

Wal-Mart shares were down 41 cents, or 1 percent, at $43.50 in late morning New York Stock Exchange trading.

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