Walmart amending supplier contracts to control pricing

Walmart (NYSE:WMT) is amending its agreement with suppliers in order to better control costs. New letters and agreements will go out to 10,000 suppliers this week, according to U.S. CEO Greg Foran.

Foran first hinted that terms with suppliers would change back in an April presentation with analysts, Arkansas Online reported.

Typically supplier agreements are renewed once a year and outline the terms of payment, when and how items are supplied, the distribution and housing of goods, and any other conditions of sale. Though terms differ from supplier to supplier, the new agreements will focus on relationships with vendors.

The goal for Walmart is to reduce costs, keeping prices low for shoppers. It's also part of the larger outlook to improve traffic and sales in its U.S. stores. In the first quarter, Walmart reported a 1.1 increase in same-store sales and revenue was up 3.5 percent.

"As big as Walmart is, they really strive to simplify things as best they can," Darrell Rosen, president and COO of supplier consulting firm 8th & Walton, told Arkansas Online. "If it can be done in three steps, don't add five. Keep it in three. Simplicity is a way to keep costs low."

Walmart's effort to remain a price leader has been addressed throughout the year. However, the company remains committed to making an investment in improving employee pay. In February, Walmart announced it would raise entry minimum wage to at least $9 an hour, and to $10 an hour in 2015.

For more:
-See this Arkansas Online article

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