02/09/98 AT SAM'S, NEW WARES FOR THE WAREHOUSE

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AT SAM'S, NEW WARES FOR THE WAREHOUSE

When new Sam's Clubs Chief Executive Mark S. Hansen was being wooed by Wal-Mart Stores Inc. last year, he was thrilled that so many retailing pundits had ''written the obituaries'' for the warehouse-club business. Says Hansen: ''Usually, the best opportunities come out of the ones people think are dead.''
Such opportunities are what he hopes to find in Wal-Mart's Sam's Div., the $21 billion U.S. club chain that makes up 18% of Wal-Mart's sales. Sam's makes money, but not at the rate of Wal-Mart Stores. In the first three quarters of 1997, Sam's profits rose 9%; Wal-Mart Stores' jumped 17%. Sam's has vexed Wal-Mart for years with weak growth, while rival Costco Cos. has soared.
''LIVING WELL.'' Wal-Mart management desperately wants to make Sam's a growth company. Hansen, former CEO of pet-supply chain PETsMART Inc., believes Sam's has room to double its sales in the U.S. To that end, Hansen is ''relaunching'' Sam's on Feb. 6 with new benefits, lower prices, and a new slogan: ''The secret to living well.''
To many observers, Sam's is simply playing catch-up. Marketing consultant James M. Degen of J.M. Degen & Co. figures that Sam's sales per store--with 444 clubs to Costco's 205 in the U.S.--are only 55% of Costco's. Costco's same-store sales grew by about 9% last year, nearly triple Sam's rate. Costco, based in Issaquah, Wash., is already a leader in fresh foods and is adding services such as credit-card processing for businesses and long-distance service. Hansen is pushing in the same direction for Sam's, adding Internet access and a mail-order pharmacy.
While extra bennies will help, they will fix only part of the problem. Sam's has lost its edge by becoming too predictable, Hansen concedes. He promises to bring back the ''treasure hunt'' quality of club shopping, with frequent changes of product and unbeatable prices on high-quality goods. ''You shop Sam's because you have money, not because you need to save money,'' says Hansen.
BACK IN THE PACK. In another nod to more discriminating customers, Sam's will remodel more than 200 buildings this year. Costco is hardly quaking. ''We've found that we can coexist,'' says Chief Financial Officer Richard A. Galanti.
Even as he tinkers with existing stores, Hansen plans to rock the industry this fall with a new ''Millennium Club.'' Hansen isn't giving details but says it will be in Costco markets and may include home decor and health care. ''At the end of the day, we will have a differentiated product that will be better than what Costco has on the street,'' he says.
That's bold talk. For now, though, Hansen's bosses will probably be happy if he can simply catch up with its very healthy rival.
By Wendy Zellner in Bentonville, Ark.
REID HORN

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