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How T-Shirts Can Be Walmart's Ticket to Profits

The news from Bentonville just keeps coming. As part of Walmart's (WMT) back-to-basics campaign to recapture its core customers, the discount giant is making way for the most integral item in anyone's wardrobe -- the T-shirt. What's getting the boot? TVs.

You read that right. Even though Walmart just announced it would bring back 8,500 products, the electronics department is going to shrink.

Walmart hasn't lined the style piper's pockets in a long time. After a string of tepid responses to its designer collaborations with Norma Kamali and Mark Eisen, it's spent a year shying away from the spotlight on clothing. The result: apparel only accounted for 10 percent of the total business in 2010, down from 11 percent in '09.

During this time Lisa Rhodes, Walmart's newly-installed U.S. division apparel chief, was tasked with making Walmart's initiative -- focused on ultra-cheap basics -- profitable, while overhauling the retailer's entire ailing apparel strategy.

The winning scheme as defined by team Rhodes is to yank the inexpensive flat screen TVs Walmart flogged for the past several years in favor of broadening the floor space in clothing. Electronics will now feature smaller products to fit the slimmed down space (think iPads and mobile phones). Though much smaller than a typical flat screen, even a bottom-of-the-line 9.5 inch iPad will set you back 500 clams -- exactly the same as a Samsung 32 inch LCD TV.

Back in apparel, having more room to stock proven winners is a no-brainer. Even during its failed effort to peddle stylish togs, basics such as ladies' plus sizes and men's work-related clothing continued to sell steadily. I argued back in August that Walmart could still win at apparel if it pursues its own strengths and doesn't try to copycat Target (TGT). Simple basics such as those found in its Hanesbrands Just My Size women's sportswear and Dickies workwear (think industrial-grade khakis and coveralls) assortments, could build out with more colors, more styles, and sizes, yet maintain the same affordable prices.

And just like that, Walmart can boost profits per square foot in both departments. A reversal of two years' worth of declining sales can't be far behind.

Image via Walmart

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