It’s not just groceries. Why clothing is important to Walmart

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The company is launching a new in-house clothing brand called Free Assembly. The 55 piece collection ranges from $9 to $45 and will sell online and in 250 Walmart (WMT)stores.

In a blog post, the company said that it aimed to offer “high-quality pieces” at lower prices. Examples include a $45 structured blazer and a $40 fishtail parka. Some of the items are made from organic cotton.

Walmart’s (WMT) primary business is groceries, which account for more than half of its sales. But groceries are a notoriously low-margin business. So Walmart in recent years has been building out its clothing and home goods’ offerings.
Walmart launched a new private label brand called Free Assembly.
In 2018, it debuted four new private-label lines: Time and Tru for women, plus-sized Terra & Sky, Wonder Nation for kids, and George for men.
Clothing makes up less than a tenth of Walmart’s sales, compared to around 20% at Target (TGT), according to filings. But clothing carries higher profit margins than groceries. And selling private label brands is more profitable for Walmart than name brands.

So Walmart hopes that when customers come into stores to buy groceries, they’ll also pick up new shoes or jeans.

“When you drive the traffic with [groceries] and you can get customers then to buy home and apparel…that helps a lot with the margin,” Walmart financial chief Brett Biggs said at an investor conference this spring.

Rivals have also had success with their own private-label clothing brands, including Target, Amazon (AMZN) and even Costco (COST).
More recently, Walmart made its first foray into the clothing resale market through a collaboration with ThredUp that would add fashion brands not sold at Walmart such as Coach, Nike, Calvin Klein and Michael Kors.

—CNN Business’ Nathaniel Meyersohn contributed to this article.

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