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NEW YORK — As Wal-Mart prepares for its annual shareholder meeting Friday, several large retailers are emulating the king of one-stop shopping and offering more necessities.
The stores are trying to keep registers humming, as Wal-Mart has, amid a recession that has pushed consumers to cut back spending to essentials — food, cleaning products and other consumables.
Target, known for cheap chic clothing and home accessories, is adding fresh food and relaunching an in-store line of home and personal-care products like sunscreen as up & up. Toys R Us Inc., which has long carried baby formula and diapers, is rolling out a new section in 260 of its almost 600 stores with more consumables, like paper towels, hand soap and detergent.
Family Dollar Stores Inc. has been rapidly expanding its once-limited food assortment and adding brands like Jif peanut butter from J.M. Smucker Co. and Triscuits from Kraft Inc.'s Nabisco brand as it strives to pull in more shoppers. It added 200 new food items in May, according to company spokesman Josh Braverman.
Ken Perkins, president of RetailMetrics, noted there was a good reason consumables weren't seen as a growth engine before: Profit margins are much thinner in food than apparel or home furnishings.
"It's boring, and there's not much glamour," Perkins said. "But Wal-Mart has set the gold standard and the path to follow in recessionary times."
Merchants are realizing that if shoppers are going to keep spending less, stores need them to come in more frequently. And offering a greater range of necessities will help.
Wal-Mart has been one of few bright spots in retail since the recession began in late 2007.
Necessities like groceries and health and wellness items accounted for about 60 percent of Wal-Mart's revenue of $405.6 billion last year, bringing in about $243 billion.
Including Wal-Mart, the same-store sales index from the International Council of Shopping Centers-Goldman Sachs has averaged a 0.5 percent decline this year compared with last. Without Wal-Mart, the industry index would have fallen 4 percent. Sales at stores open at least a year are considered a key indicator of a retailer's health.
Similarly, first-quarter profits fell 12 percent this year compared with last year industrywide, and without Wal-Mart they would have dropped 17 percent — though profit the gap between Wal-Mart and the rest of the industry has narrowed as merchants increase cost-cutting, Perkins said.
The big issue is whether Wal-Mart will be able to retain its new customers once the economy recovers. Wal-Mart's stock soared 20 percent in 2008, as investors focused on companies that benefited from the steep downturn in consumer spending. But its shares have fallen 10 percent so far this year as Wall Street turns to retailers that sell more discretionary goods and could benefit when the economy improves. That has driven up share prices for such merchants as Macy's Inc. and Minneapolis-based Target Corp., both of which suffered steep share declines in 2008.
Wal-Mart officials remain upbeat, saying such frugality will remain.
"Consumers are changing their thinking, and their behavior," said Mike Duke, who assumed the reins at Wal-Mart Feb. 1, in an address to investors last month. "Our regular customers are shopping us more often and for more items, and we're attracting more new customers."
Megan Keller, a 24-year-old office worker who lives in Oconomowoc, Wis., went back to shopping at Wal-Mart last summer to save money.
"I buy food and produce just because it's cheaper there," said Keller. "It's not even the sale items."
Wal-Mart executives have said 17 percent of the company's growth in customer traffic came from new customers, based on sales data in February, and these new shoppers are spending 40 percent more per transaction than the company average.
Retailers say focusing on necessities is paying off. Target's chief executive, Gregg Steinhafel, said strong sales at established stores in necessities like food helped his company's first-quarter earnings beat Wall Street estimates. Necessities account for about 40 percent of Target's sales.
Family Dollar's same-store sales increased 6.4 percent in its latest quarter, helped by increased customer traffic. Food is now approaching 20 percent of sales, up from 15 percent for the Matthews, N.C.-based chain.
Spokeswoman Kathleen Waugh at privately held, Wayne, N.J.-based Toys R Us said sales in its new consumables departments have surpassed expectations.
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AP Retail Writer Emily Fredrix in Milwaukee contributed to this report.
