Walmart's $9 billion store makeover may already be paying off

Spotlights, staged dinner tables, dressed mannequins — no, it's not your local theatre play — rather a revamped Walmart (WMT) store.

America's biggest retailer is seeing some early returns after it announced the grand re-opening of 117 remodeled locations last month. The total price tag for the remodels was over $500 million, with features like new light fixtures, product displays, interactive signs with QR codes, mannequins and more.

It's part of a $9 billion dollar plan to modernize more than 1,400 stores in the US over two years. In a call with investors following its Q3 results, which showed a slowdown in consumers spending, Walmart US CEO John Furner said the team was "pleased" with the performance of the remodels so far.

"The customer reaction of the new assortment particularly...apparel, pets, beauty, home, a number of categories is really great," Furner added.

Telsey Advisory Group Senior Managing Director Joe Feldman, who has an outperform rating on shares, called the renovations "really well done" over the phone to Yahoo Finance.

Feldman said the showcases in home and apparel is able to "highlight products better," and reminds him of one of the retailer's rivals.

"They've got mannequins, dressed up...you can see the whole family kind of the way Target does."

Another new feature is an elevated display setup, like pictured above.

In Q3, sales of general merchandise had a low-single-digit drop due to fewer people buying discretionary items like apparel, home decor, and toys. Physical displays could help with that, Feldman said.

"It shows more of the style and highlights some of the quality of the discretionary goods, and gives people ideas of how the product they buy could work for them."

Consumer psychologist Dr. Cathrine Jansson-Boyd of Anglia Ruskin University said that this sort of display is a shoe in for converting window shoppers to paying customers.

"[If] physical retailers can get consumers through the doors, get them to interact with things, get them to touch stuff. The sale is almost done," she told Yahoo Finance over the phone, "We know that when you physically interact with something, consumers take psychological ownership of it, so they are more likely to purchase it. They're also more likely to want to pay more for it."

It's about perception too, Feldman said.

"People historically have thought about Walmart is just a cheap place to shop" he said.

The company has invested in new signage, refreshed interiors, increased check out options, grab and go food sections, and more prominent pharmacies to update their image. The more premium design help showcase merchandise, including branded goods like Reebok, Justice, Sofia Vergara and US Polo Association as pictured above.

Walmart also added digital displays, like pictured above, with QR codes that allow customers to get more information and browse similar products.

Jansson-Boyd said its playing on people's innate need to "press a button."

"[Touch points] It's just one of those things... if you put up a no touch sign in the museum next to a button, people will still go and press the button. We know that because people want to press buttons. And again, it's a nice way of stimulating people."

Dynamic displays and more modern looking stores could help Walmart attract advertisers, boosting its growing advertising business.

Revenue of Walmart Connect, which includes online ads and ads in stores, increased 26% year-over-year in Q3.

The redesigns link physical shopping with e-commerce, and expanded pick up and delivery areas for online orders. Last quarter, Walmart's US e-commerce sales jumped 24% compared to 2022.

Walmart executive Hunter Hart, who oversees the company's real estate, told Yahoo Finance that its new features allow the company to "future proof" its brick and mortar business.

"We have the the advantage of not only being close to customers with the brick and mortar asset, but also being able to do pickup and delivery...making sure that they are future proofed for not only growth inside of the store, but also curbside," he said over the phone.

Based on early results, Furner said the team plans to make changes to other stores too.

"We'll continue our remodel program throughout next year. We have a good plan on the number of sites. We're excited about the results that we're seeing from those. We definitely hear and know that our results change for categories like apparel, home, so I think we have a good plan there," he said on the Q3 call.

While Walmart did not disclose how much sales boost these new features led to, Feldman believes it must have been a significant difference.

Walmart doesn't continue investing typically "unless they feel really good about something," he said, adding "to get this many stores done so quickly, is also another sign of the fact that they feel that good about it."

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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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