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Wal-Mart reorganizing into regional operations

/ Source: The Associated Press

Wal-Mart Stores Inc., the world's largest retailer, said Thursday it is realigning its U.S. operations in an effort to give more autonomy to executives in regional markets and reinvigorate U.S. growth.

Wal-Mart is combining its U.S. realty, store operations and logistics divisions and reorganizing operations under three geographic business units headed up by regional presidents: West, South and North.

"This move will help facilitate our growth as we seek to enter new markets and develop new segments across the U.S. and will drive efficiencies by allowing us to better leverage our resources," Vice Chairman Eduardo Castro-Wright said in a statement.

The regional alignment will help stores more closely connect to their customers, no easy feat when you are the world's biggest consumer company, said Craig Johnson, president of retail consultancy Customer Growth Partners.

"It's like turning around the Queen Mary, but the more you can do to become a customer-driven company, the better it is."

Wal-Mart, which generated $400 billion in sales last year, has been able to grab wealthier consumers trading down from higher-priced stores. But the discounter also has seen growing signs of financial strain among its core customers, noticing more pronounced swings in spending between paycheck cycles.

It has been experiencing some softness in its U.S. business. In the most recent quarter, the company's namesake discount stores saw sales at U.S. stores open at least a year fall 0.5 percent.

The weak U.S. performance was eased somewhat by growth abroad, where total sales rose 1.6 percent. Adjusted for currency fluctuations, international sales rose 12.1 percent.

By granting geographic regions in the U.S. more autonomy, the new structure is more similar to how Wal-Mart functions overseas.

The moves will let the company "leverage our size and global scale to drive greater efficiencies and lower the cost of goods to help accelerate growth," Castro-Wright said. "While creating, at the same time, significant development and growth opportunities for many associates."

Earlier on Thursday, Wal-Mart, based in Bentonville, Ark., said it will consolidate some of its sourcing with Chinese exporter Li & Fung. Li & Fung will form a new company to manage the Wal-Mart Stores account and will buy goods valued at about $2 billion within its first year.

The moves come after Wal-Mart's Sam's Club division said it would close 10 underperforming stores and lay off 11,200 workers as it restructures its in-store demonstrations unit.