Citi analyst: Merchandising moves should help Wal-Mart

New York City A Citi investment research analyst wrote Wednesday that Wal-Mart Stores' intense focus to correct merchandising mistakes will result in revenue improvement in the second half of the company's fiscal year.

In a note to investors and released by the Associated Press, analyst Deborah Weinswig reiterated a "Buy" rating after a meeting with Wal-Mart's top management. The retailer reported in August its fifth consecutive quarter of declines in same-store sales, dragged down by its U.S. Walmart division and attributed in large part to merchandising problems.

New U.S. president and CEO Bill Simon has moved to restore items the retailer axed last year and to return to everyday low pricing after steep rollbacks failed to boost sales. Walmart is also returning to such basics as socks and underwear as part of its new clothing strategy.

"The company's outlook for [the second half] is cautious as the health of its core customer has not improved," Weinswig wrote. But she added, "We expect (the second half) topline trends to benefit from a broader assortment across categories and an increase in selling space."

Wal-Mart is adding back anywhere from 5% to 25% more items in areas such as groceries, Weinswig noted.

She also said that Wal-Mart has increased visibility of key clothing brands and added more plus sizes to "better meet the needs of its core customers.”