IT’s DAYS OF SUPPLY INSTEAD OF WEEKS OF SUPPLY FOR DIY RETAILERS LIKE HOME DEPOT

While the DIY retail segment is currently booming – Home Depot is targeting a 15% sales growth by 2018 – their strategies for inventory in their stores is changing. “Get comfortable with days of inventory, not weeks,” Tom Shortt, Home Depot’s senior vice president of supply chain, says is the message going out to stores. 

Rather than filling its warehouse stores with inventory, Home Depot wants fewer items on its shelves and wants those items within customers’ reach. Online shopping is making retailers think of better ways to profitably serve online shoppers and have inventory in stores, as well. They need to decide if they will ship to consumers from a distribution center or store.

WalMart and Target have also made changes to in-store inventory levels. WalMart’s inventory levels rose slower than sales, helping to improve their gross profit margins in the first quarter.  Boosting sales and stocking less items increase the percentage of cash they get back from the amount they invest in inventory. The strategy is to put less inventory in the stores and replenish more frequently based on demand instead of a forecast.

Home Depot’s strategy is called “Project Sync” which includes such changes as seeing suppliers send 2 trucks five days a week, versus 5 trucks 2 times per week.

Monitoring the return on invested inventory capital and tracking consumer demand closely in order to manage inventory and replenish based on demand can only be accomplished with frequent analysis of POS data in stores, looking at SKU-Store sales and on hands, trending days of supply and sales to stock ratios.

Source: Wall St. Journal

CONSUMER SATISFACTION WITH RETAIL IS ON A DECLINE

The American Consumer Satisfaction Index (ACSI) reports that consumer satisfaction with retail is on the decline for the first time in four years.

The ACSI report states brick-and-mortar customer satisfaction fell flat or weakened, while Internet retail is up from last year. By category, overall satisfaction with department and discount stores stayed flat at 77, while the gap between best- and worst-ranked companies grew. Nordstrom was the top rated, gaining 4% to 86. They are followed by Dillard’s (81), Kohl’s (-1% to 80) and Macy’s (79). Walmart dropped 4% to 68 and is at the bottom of the category behind Target (+4% to 80), Meijer (78) and Sears (-5% to 73).

Among home improvement chains, Lowe’s rated best at 81, while Home Depot falls to the category’s bottom dropping 4% to 76.

Amazon remains at the top of the Internet sector, at 86. Netflix improved for the third straight year gaining 3% to 81. Overstock and eBay both dropped to 77 and 79, respectively.

The ACSI is a national economic indicator of customer evaluations of the quality of products and services available to household consumers in the US. The ACSI uses data from 70,000 customers annually for measuring satisfaction with more than 230 companies in 47 industries.

Resource: Retailing Today

Walmart Gives Gift Of Positive Comps

November 13, 2014

Walmart's same store sales turned positive during the third quarter, ending a two year drought, prompting the company to forecast a U.S. comp increase of as much as 1% during the fourth quarter.

Third quarter same store sales at U.S. stores increased 0.5% and were aided by inflation and the impact of a 5.5% comp increase at the company's Neighborhood Market locations.  Fourth quarter comps at U.S. stores are forecast to be flat or up 1%.  One percent may not sound like much, but if realized or possibly exceeded the additional sales volume would be substantial considering the U.S. stores division generated third quarter sales of $70 million, a 3.4% increase from the prior year.

Total company sales increased 2.8% to $118.1 billion, including a negative impact of nearly $400 million related to currency exchange fluctuations.  Profits declined 0.7% to $3.7 billion, but earnings per share increased by a penny from the prior year to $1.15, squarely in the middle of the company's guidance range of $1.10 to $1.15 and three cents better than analysts forecast.  Walmart's earning per share calculations benefited from the repurchase of 1.1 million shares during the quarter.

Despite the slight advance in earnings, Walmart Stores, Inc., president and CEO Doug McMillon called the profit performance "solid."  He singled out as positives the U.S. stores comp increase, a 21% increase in e-commerce sales and profitablility of the Sam's Club and Walmart International businesses.

"We're investing in key areas of our business, including wages in our U.S. stores and in e-commerce and mobile capabilities.  We continue to see opportunities to improve our business," McMillon said.  "Being the price leader is an ongoing priority for us and a commitment to customers.  As with every year, that is even more important during the holiday season.  We have some things in our favor this fourth quarter, including lower fuel prices in the U.S. and other key markets, and we're set to deliver for customers during this time."

Same store sales at Sam's Club, excluding fuel, increased 0.4% and total sales, excluding fuel, increased 2.3% to $12.7 million.  Despite the modest top line growth, operating profits increased 12% to $493 million, the strongest improvement of Walmart's three divisions.

Walmart International sales increased 1.7% to $33.7 billion, but on a constant currency basis increased 2.9% to $34.1 billion.  Operating profits increased 3.7% to $1.43 billion.  Operating profits at U.S. stores declined 1.2% to $4.9 billion.

Looking forward, Walmart forecast fourth quarter earnings between $1.46 and $1.56 and full year earnings per share to range from $4.92 and $5.02, lower than the company's earlier guidance of $4.90 to $5.15.

"Our earnings per share guidance assumes several important factors, including the economic conditions in several of our largest markets, and a highly promotional holiday season," said Walmart CFO Charles Holley.  "As a reminder, our full year EPS guidance includes the four factors we discussed last quarter, which were higher U.S. health-care costs, incremental investments in e-commerce, ongoing investments in Sam's Club, and our effective tax rate."

Source: Retailing Today 

Walmart Slows Physical Expansion In U.S.

October 15, 2014

A much anticipated acceleration of small format Walmart stores failed to materialize on Wednesday when the retailer announced plans to curtail domestic new store growth in 2016.

Walmart said it would open between 200 and 220 Neighborhood Market stores and 60 to 70 supercenters next year.  Both figures are below the company's projections for current year openings.  Walmart said it will end its current fiscal year with 240 Neighborhood Market stores, below the range of 270 to 300 openings that had been forecast earlier in the year.  The number of supercenters that will open this year is expected to be 120 units, slightly higher than the projection shared at the beginning of the year.

As a result, Walmart said its capital expenditures in the U.S. would range between $6.1 billion and $6.6 billion compared to $6.6 to $6.9 billion during the current year.  Total capital expenditures, including international operations, Sam's Club and e-commerce, in 2015 are expected to range from $11.6 billion to $12.9 billion, below the $12.5 billion to $13 billion the company expects to spend this year which is below the $13.1 billion spent in 2013.

"We know that our supercenters are an important format for the stock-up trip, but we want to be thoughtful about our investment, ensuring that we align the space to evolving customer needs," said Walmart U.S. president and CEO Greg Foran.  "To do this, we will moderate supercenter growth in fiscal 2016.  Our investment in Neighborhood Markets will go forward because they continue to show strong results across the box and they provide our customers with convenient access to grocery, pharmacy services, and other quick-trip needs."

The reduced pace of supercenter expansion isn't surprising as Walmart currently operates 3,375 of the large stores, but Neighborhood Market is a different story.  Walmart currently operates 428 Neighborhood Market stores and in prior meetings with analysts and during quarterly earnings calls the company has raved about the strong mid-single digit same store sales performance of the small format food and drug stores.  In recent weeks, the company also implemented a new organizational structure which appeared to foretell of greater things to come for a concept said to be gaining share.

Offsetting the reduced pace of physical expansion, Walmart said it was increasing investment in e-commerce to a range of $1.2 billion to $1.5 billion, ahead of current year spending of roughly $1 billion and well ahead of the $400 million spent in 2013.  Those investments will enable the company to build one million square foot online fulfillment centers in Georgia and Pennsylvania and new facilities in Brazil and China.

The increased e-commerce spending comes as Walmart failed to realize current year online sales targets.  The company said current year e-commerce sales will total roughly $12.5 billion, roughly $500 million less than guidance for e-commerce sales of $13 billion shared last year at this time.

Overall, Walmart presented a fairly bleak outlook at its 21st annual fall investor conference which explained why the company's shares tumbled $2.78 on Wednesday.  In addition to the reduced physical expansion and less than expected online sales, the company said it is operating in a tougher sales environment than it anticipated a year ago.  Consequently, sales for the current fiscal year are expected to increase between 2% to 3% on top of last year's sales of $473.1 billion.

The rate of sales growth in 2015 has the potential to improve slightly, based on guidance the company provided at its meeting.  Sales are forecast to increase between 2% and 4% next year resulting in the addition of between $10 billion and $20 billion in sales volume.  However, at that rate of growth profits will come under pressure as Walmart said its operating expenses are expected to grow at a somewhat faster rate which in turn will cause operating income to be flat to slightly down in 2015.

Despite a number of worrisome disclosures at the meeting, Wal-Mart Stores, Inc., president and CEO Doug McMillon sought to reassure members of the financial community that the company's prospects are bright.

"This is an exciting time for Walmart, as there are so many new ways to serve customers.  Exceeding customer expectations has always been our goal, and we have short and long-term opportunities to do that even better," McMillon said.  "We'll change the mix of our capital spend next year to provide greater access, while continuing to focus on price leadership, service, and a broad assortment.  We'll give customers the choices they want and need in ways that only Walmart can."

Source: Retailing Today

Walmart's Not So Solid Second Quarter

August 14, 2014

Walmart met low second quarter sales and profit expectations it set for itself, but significantly lowered its full year outlook due to a tepid third quarter sales forecast and increased e-commerce and health care costs.

Total company sales increased 2.8% to $119.3 billion while same store sales at U.S. stores and Sam's Clubs were flat during the period ended July 31.  The total sales figure included a $696 negative impact related to foreign currency translation, without which sales would have increased 3.4% to $120 billion.  Net income increased 0.6% to $4.093 billion from $4.069 billion, but earnings per share declined to $1.21 from $.123.  Walmart had forecast earnings in a range of $1.15 to $1.25 and analysts' consensus estimate was $1.21.

Despite the decline from the prior year, Wal-Mart Stores, Inc., president and CEO Doug McMillon said he was pleased with the earnings per share performance.

"As it relates to the positives from the quarter, I'm encouraged by the performance of our International business, our Neighborhood Market sales in the U.S. and by our e-commerce growth," McMillon said.  "As it relates to our challenges in the quarter, we wanted to see stronger comps in Walmart U.S. and Sam's Club, but both reported flat comp sales.  Stronger sales in the U.S. businesses would've also helped our profit performance."

The flat U.S. comp performance followed a 0.3% decline the prior year, as an increase in transaction size offset a decline in traffic.  Total sales for Walmart's largest division increased 2.7% to $70.6 billion due to the addition of new selling space.  However, operating profits fell 2.4% to $5.25 billion.

"We delivered net sales growth of $1.9 billion in the second quarter," said Greg Foran, Walmart U.S. president and CEO.  "Our e-commerce business, including store-fulfilled sales, delivered double-digit sales growth," added the former Walmart International executive who replace Bill Simon as head of the U.S. division last week.

Same store sales at U.S. stores are forecast to be flat in the third quarter following a 0.3% decline last year.

Sam's delivered top line growth due to the addition of new clubs, but same store sales were flat.  Total sales increased 1.7% to $13 billion, excluding fuel.  Operating profits fell 4.6% to $494 million.

"Our top priority at Sam's Club remains growth - growing our member base and growing sales," said Rosalind Brewer, Sam's Club president and CEO.  "We're taking steps to increase the value of membership through investments in Plus member cash rewards and the cash back Mastercard.  It's still early, but member response has been positive.

Sam's is expecting third quarter comps to be slightly positive.

The relative bright spot in Walmart's second quarter was the international division where sales on a constant currency basis increased 5.3% to %34.6 billion and operating profits grew 8% to nearly $1.5 billion.

"We remain focused on price investment across all our markets and expect to continue driving improved comp performance," said David Cheesewright, Walmart International president and CEO.  "I am pleased with the trends in many of our markets, which were driven by a continued focus on being the lowest cost operator."

Faced with ongoing difficulties to drive top line growth at its two U.S. divisions coupled with expense pressures, Walmart said it expects third quarter earnings per share of $1.10 to $1.20 and lowered its full year forecast to a range of $4.90 to $5.15 from an earlier forecast of $5.10 to $5.45.

"Our guidance includes incremental investments in e-commerce and headwinds from higher health-care costs in the U.S. than previously estimated," said CFO Charles Holley.

Source: Retailing Today

Greg Foran New CEO At Walmart U.S. As Bill Simon Departs

July 24, 2014

Walmart named Greg Foran president and CEO of its U.S. stores division to replace Bill Simon, who is leaving the company after an eight-year run.

Foran is a relative newcomer at Walmart, who joined the company in October 2011 and by March of 2012 had been elevated to the role of president and CEO of Walmart China.  In that capacity, he reported to current Wal-Mart Stores president and CEO Doug McMillon, who at the time served as president and CEO of Walmart International.  McMillon assumed his new role earlier this year prompting speculation that Simon would leave the company if he were passed over for the top job.

"Greg is one of the most talented retailers I've ever met.  His depth of knowledge and global experience will bring a fresh perspective to our business," said McMillon.  "His passion for fresh food, experience in general merchandise and commitment to e-commerce will help us serve our customers even more effectively for years to come."

Although he only briefly oversaw Walmart's China operations, the team made significant progress with its assortment, pricing, store operations and compliance as Foran led strategic investments in the supply chain and improved the store portfolio, according to a Walmart statement.  Foran was elevated to the role of president and CEO of Walmart Asia earlier this year to oversee the retailers business in Japan and India as well as China. 

McMillon spoke highly of Simon who will transition out of the company in the next six months.

"During Bill's eight years of service to Walmart, his passion for our mission, dedication to our associates and our customers, and innovative thinking pushed us forward," McMillon said.  "From the very beginning, his vision led us to lower the cost of health care through our $4 prescription offering.  And, most recently, he put us on a path to future growth with small formats and efforts that integrate digital and physical retail."

Foran will assume his new responsibilities on August 9.  Prior to joining Walmart three years ago, Foran held a number of roles with Woolworths, the leading retailer in Australia and New Zealand.  He served as the managing director of supermarkets, liquor and petrol with responsibility for more than $40 billion in sales at that time.  Under Foran's leadership, the business grew sales and market share in a strong competitive market.  Earlier in his career, Foran served as general manager of Big W, Woolworth's industry leading discount store business and as general manager of Dick Smith Electronics.

"I've worked closely with Greg for the past few years and I've seen firsthand his passion for retail.  I'm confident that Greg's strong leadership skills and alignment with our culture will serve our customers and associates well," McMillon said.  "I'm excited what he will bring to this important part of our business."

"Being asked to lead the Walmart U.S. business is a privilege that I don't take lightly," said Foran.  "I am excited to get started.  The needs of our customers are changing dramatically and we have an enormous opportunity to serve them in new and different ways.  We must be fierce advocates for our customers, work meticulously to exceed their expectations and earn their trust every day."

Simon said it had been an honor to work for Walmart for the past eight years, adding, "this felt like the right time to move on and focus on my next opportunity.  I look forward to helping the company as much as I can in the next six months."

Walmart said it would name Foran's successor as president and CEO of Walmart Asia at a later date.

Source: Retailing Today

Walmart Shares Cautious Outlook For Future Sales

May 15, 2014

Walmart continues to envision flat same store sales at its U.S. stores after reporting weaker than expected profits on weak U.S. sales results that were negatively affected by a winter that wouldn't end.

Net income declined 5% to $3.6 billion and earnings per share of $1.10 were five cents below analysts' expectations and below the company's prior year first quarter profit of $1.14.  Even excluding the effects of the severe winter, estimated by Walmart to be three cents a share, the company's profit figure would have been below the prior year amount, although with the guidance range of $1.10 to $1.20.

Sales at Walmart's U.S. stores increased 2% to $67.9 billion although same store sales declined 0.1% after declining 1.4% during the first quarter the prior year.  Sales at Sam's Club including fuel were essentially flat at 13.9 billion, but increased 0.5% if fuel sales are excluded.  Same store sales declined 0.5%, excluding fuel, after a prior year drop of 0.2%.

"Like other retailers in the United States, the unseasonably cold and disruptive weather negatively impacted U.S. sales and drove operating expenses higher than expected," said Doug McMillon, Wal-Mart Stores, Inc. president and CEO.  "Walmart's underlying business is solid, and I'm confident in our long-term strategies.  We'll continue to invest in price and enhance our service to improve sales.  We remain focused on growth across the enterprise, especially in small formats like Neighborhood Market in the U.S."

The company highlighted what it called significant investments in e-commerce initiatives, including its global technology platform, and said sales worldwide rose approximately 27% and noted that e-commerce had a 0.3% favorable impact on same store sales.

"We have the opportunity to create transformative growth through stronger e-commerce capabilities," McMillon said.  "Our investments are focused on improving customer experience and fulfillment capacity.  We're working to deliver a relevant personalized and seamless customer experience across all channels to further grow sales."

Total company sales for the quarter ended April 30 increased 0.8% to $114.2 billion, but would have grown 2.1% if a $1.6 billion negative impact of currency exchange rates were excluded from the calculation.

Walmart had set a low bar for itself heading into the quarter which began in early February as severe winter weather was hitting the nation at the time the company provided guidance calling for flat same store sales at U.S. stores and clubs.  Although weather conditions have improved nationwide, the retailer continues to forecast relatively flat comps while touting strong fundamentals of its business.

"A number of severe winter storms negatively impacted us during the quarter.  A solid start to spring and a strong Easter drove positive comps in the back half of the quarter," said Bill Simon, Walmart U.S. president and CEO.  "Neighborhood Markets continued to deliver strong results.  Comp sales increased approximately 5% for the quarter, and net sales have nearly doubled versus two years ago.  We saw strength across food and health and wellness, and we're particularly pleased with our overall traffic trend.  April marked the 46th consecutive month of positive comps for Neighborhood Market."

Like McMillon, Simon touted Walmart's solid fundamentals and said, "our recently launched initiatives, including the Walmart 2 Walmart money transfer service and the video game trade-in program, along with continued price investment, will resonate with the customer."

As for Sam's Club, president and CEO Rosalind Brewer, highlighted several noteworthy developments such as 10.9% growth in membership income driven by a fee increase.

"We expect that the combination of the national rollout of Sam's Club Cash Rewards and the launch of our new industry cash back credit card will enhance member value to drive stronger membership growth," Brewer said.  "These programs, along with our improvements in merchandise, are expected to drive better comp sales in the future."

Source: Retailing Today

Walmart Testing Convenience Concept

March 18, 2014

Walmart this week opened its first small format convenience store branded as Walmart To Go in its hometown of Bentonville.

The concept offers a familiar blend of convenience store products, prepared foods and gasoline and is not to be confused with Walmart's other small format concept known as Walmart Express.  The Express format measures about 15,000 sq. ft. and also appeals to convenience minded shoppers with gas, a pharmacy and fresh food offerings.  The Walmart To Go store bears the same name as a home delivery grocery service the company launched three years ago in San Francisco and expanded to Denver last year.

The Walmart To Go store is located at the heavily trafficked intersection of South Walton Boulevard and S.W. 14th Street, less than a half mile south of Walmart's headquarters.  The intersection is well suited to a convenience store format with easy ingress and egress.  However, as retail tests go, Walmart won't get a true read on the viability of the concept until it is exposed to competition in a market where the shopper base is not distorted by those who work for or sell products to Walmart.  The proximity to the retailer's headquarter ensures that a large percentage of those visiting the store will have some type of Walmart affiliation.  Also of note is the fact that the most meaningful competition for Walmart To Go will come from other Walmart formats.  A Walmart supercenter with a gas station is located adjacent to Walmart's headquarters and a 45,000 sq. ft. Neighborhood Market store, which is also designed to satisfy shoppers' convenience needs, opened last year and is less than a mile from the new Walmart To Go.

Source: Retailing Today

Smaller Format Stores

March 11, 2014

Smaller format stores are all the rage these days.  Dollar General, which already operates nearly 12,000 stores, plans to open 700 more  this year.  Walmart recently announced plans to accelerate growth of its smaller format stores by opening between 270 and 300 small stores, more than double the 120 to 150 store range it projected last fall.  Even Target has gotten in on the action with plans to open its first Target Express store near downtown Minneapolis this summer.

Source: Retailing Today

Kroger And Costco Outshine Walmart

March 6, 2014

Walmart didn't mention competitive issues as a source of sales weakness during its fourth quarter, but reports this week from Kroger and Costco indicate they were at least a contributing factor.

This was especially true in the case of Costco.  Recall that Sam's reported a same store sales decline of 0.1% during the fourth quarter ended January 31, after a 1.8% gain the prior year.  Operating income fell 15.3% to $425 million.  At the time, Sam's president and CEO Rosalind Brewer said the underlying health of the Sam's Club business was sound and that restructering efforts, including the elimination of 2,300 positions from club operations were allowing Sam's to be more agile and focused on growth opportunities.

"The stragegies we have in place will deliver value for our members, helping to grow the business and drive strong financial performance in fiscal year 2015," Brewer said.

Sam's expects its same store sales for the first quarter ending May 2 to be relatively flat following a 0.2% gain last year.

Conversely, Costco grew its U.S. same store sales, excluding fuel by 5% during its second quarter ended February 16.  Sam's fourth quarter and Costco's second quarter don't totally match up, but both companies' reporting periods included the holiday season.  It was evident from Costco's results and comments from CFO Richard Galanti that Costco went hard after price at the expense of profitability during the shortened and weather impacted holiday season.

For example, despite the 5% domestic comp increase, Costco's net income declined to $463 million, or $1.05 a share, compared to $547 million, or $1.24 a share, during the second quarter the prior year.  Comparisons to the prior year were made more difficult because the period included a 14 cent a share one time tax benefit related to a portion of a special cash dividend the company paid in December 2012 to 401k plan participants.

"Even with that distinction, however, the year-over-year comparison was unfavorable," Galanti said.

Contributing to profit pressures at Costco were weaker sales and gross margin results in certain non-foods merchandise categories, particularly during the four-week holiday selling season, weaker gross margins in the fresh foods business and lower reported international profits resulting from the significant weakening of foreign exchange rates, according to Galanti.

"The first four-week period of the quarter represented the majority of earnings underperformance in the quarter," Galanti said.  Costco's second quarter began on November 25, 2013 and encompassed the Thanksgiving weekend which fell late last year and compressed the holiday season.

While Costco was outcomping Sam's, Kroger was doing the same to Walmart and made no mention of bad weather or food stamp reductions in its earnings release.  Kroger reported a 4.3% increase in identical store sales, excluding fuel, and said it expects first quarter comps to rise between 2.5% and 3.5% against a backdrop of minimal inflation.

Walmart reported a 0.4% decline in same store sales at U.S. stores following a 0.3% increase last year.  Looking forward, Walmart's forecast for first quarter same store sales is flat compared to a prior year decline of 1.4%.

Source: Retailing Today

New Details Shared On Walmart's Small Formats

March 6, 2014

Walmart's tepid sales performance in the fourth quarter is water under the bridge, so when Walmart U.S. CEO Bill Simon spoke this week at an investor conference he quickly focused on the growth of smaller stores, which are being expanded at a more rapid pace.

Simon spoke Tuesday at the Raymond James Institutional Investor Conference and he wasted no time displaying his enthusiasm for smaller stores that are outperforming competitors and delivering industry leading sales per square foot.  In the fourth quarter, Walmart's Neighborhood Market stores produced a 5% increase in same store sales and for the year the comp was 4%.  Also of note is the fact that each of the stores in the fleet of more than 300 units produced a positive comp even though some locations are more than 10 years old.

According to Simon, Neighborhood Market gives Walmart the opportunity to capture the incremental sales it misses out on when customers forego one of the company's 3,200 supercenters in favor of a more convenient alternative.  The format gives Walmart the opportunity to capture a different type of trip and new customers.

Source: Retailing Today

Walmart Thinking Big With Small Formats Amid Soft Sales

February 20, 2014

Walmart knew fourth quarter results announced Thursday morning were going to be bad and its outlook weak, so it gave investors something more substantial to digest by announcing plans to double the number of small format stores it will open this year and an increased omnichannel focus.

Just four months after announcing plans to open between 120 and 150 small format stores under the banners of Walmart Neighborhood Market and Walmart Express, the company upped its growth target to a range of 270 to 300 units.  Walmart currently operates 346 Neighborhood Market stores and 20 Walmart Express stores, which it said continue to deliver positive same store sales and traffic each quarter.  Last year, comps for the Neighborhood Market format rose 4% and were driven by fresh food and pharmacy, according to the company.

The greater than expected expansion of the small formats - Walmart maintained its forecast of 115 new supercenters in 2014 - required the company to increase its capital expenditure budget for the Walmart U.S. division by $600 million to a range of $6.4 billion to $6.9 billion from a forecast provided last October that called for spending between $5.8 billion and $6.3 billion on U.S. growth.

"Customers' needs and expectatons are changing.  They want to shop when they want and how they want, and we are transforming our business to meet their expectations," said Walmart U.S. president and CEO Bill Simon.  "Customers appreciate the broad assortment of our supercenters for their stock-up trips as well as our small store formats for fill-in trips.  By unlocking this growth opportunity and further combining our supercenters and small store formats with an unlimited selection available through ecommerce, we provide our customers with anytime, anywhere access to our brand."

Walmart has been methodical, to put it mildly in its approach to small format expansion, considering the first Neighborhood Market stores opened in the late 90s.  However, Thursday's announcement marks the beginning of an era of accelerated growth for a format viewed as a key element in Walmart's omnichannel approach to serving shoppers whose expectations are evolving rapidly.

"Our small store expansion, in addition to providing customers access to a wide variety of products, including fresh, pharmacy and fuel, will help us usher in the next generation of retail.  This will combine thousands of points of physical access with digital retail experiences that include initiatives such as Site to Store and Pay with Cash," Simon Said.  "In addition to providing best-in-class one-stop shopping at supercenters, we believe that accelerating our small store expansion will also strengthen our market share and create greater effieiencies in our supply chain through a tethered approach that uses supercenters as a supply chain base, links our resources and provides a unique and connected customer experience."

News of the small format expansion helped soften the blow of Walmart's worst financial performance in recent memory and an inauspicious beginning to Doug McMillon's tenure as president and CEO of Wal-Mart Stores.  McMillon assumed his current responsibilities on February 1 after former president and CEO Mike Duke stepped down and McMillon was elevated from his role as president and CEO of Walmart International.

Total company sales during the fourth quarter increased 1.4% to $128.8 billion, including a $1.8 billion negative impact related to foreign currency translation.  Net income fell 21% to $4.4 billion while earnings per share fell 19.8% to $1.34 from $1.67 in the fourth quarter the prior year.

For the full year, Walmart's sales increased $1.6 billion to $473.1 billion, including a $5.1 billion negative impact from foreign currency translation.  Net income declined 5.7% to $16 billion and earnings per share fell 3.2% to $4.85 from $5.01 the prior year.

Those numbers, while bad, had been previously announced several weeks ago when a portion of the weakness was legitimately attributed to terrible winter weather and a greater than anticipated sales impact resulting from a reduction in the federal government's Supplemental Nutrition Assistance Program.  That left McMillon free to look forward and offer a more positive view of the future and initiatives to drive growth.

"Comp sales improvement is a key priority, and we'll focus on being even stronger item and category merchants, delivering value and improving our service level.  We'll remain focused on our expense structure, and innovate to improve productivity and aid our ability to deliver every day low prices.  Our EDLP approach earns trust with customers and helps us keep our cost structure low," McMillon said.  "We'll invest aggressively in e-commerce and increase our small store rollout in the U.S., as we've done in several other countries, to deliver value and convenience.  The combination of supercenters and smaller formats closer to customers' homes, along with e-commerce and mobile commerce, will enable us to increase our relevance for the Walmart brand around the world."

In the meantime, Walmart anticipates challenging market conditions in the first quarter and year ahead, which could cause profits to fall below prior year levels.  Same store sales at the Walmart's U.S. stores and Sam's Club are expected to be flat as the new fiscal year got off to a rocky start with more bad weather.

"We expect economic factors to continue to weigh on our outlook," said Walmart CFO Charles Holley.  "Some of the factors affecting our consumers include reductions in government benefits, higher taxes and tighter credit.  Further, we have higher group health care costs in the U.S.  These concerns, combined with investments in e-commerce, will make it difficult to achieve the goal we have of growing operating income at the same or faster rate than sales."

He indicated a 3% to 5% increase in sales during the current fiscal year that was forecast last fall now looks overly optimistic and said the company expects to be toward the lower end of that forecast.

Source: Retailing Today

Walmart Doubles Down On Canadian Brick And Mortar

February 6, 2014

Walmart is marking the 20th anniversary of its entry into Canada this year by spending big bucks to expand physical stores and distribution capacity while devoting a much smaller portion of a $500 million budget to e-commerce.

Walmart said it would spend close to $500 million in Canada this year with $376 million of that amount dedicated to 35 supercenter projects totaling one million square feet of new selling space.  Walmart currently operates 389 stores in Canada, of which 247 are supercenters.  By year end it expects to have 395 stores of which 282 will be supercenters.

To support the expanded food footprint, $91 million of the $500 million capital expenditure budget will be used for new and existing distribution center projects.  Getting the short end of the cap-ex stick is Canadian online operations where $31 million, or slightly more than 6% of the $500 million, is allocated for e-commerce projects.

"Customers in every region of Canada are looking to save money on their entire list of shopping needs," said Shelley Broader, Walmart Canada's president and CEO.  "Delivering on our commitment to help lower the cost of living is our top priority, and our growing network of supercentres and our expanding walmart.ca offering enable us to do just that."

Source: Retailing Today

Weak Sales At Walmart, Profit Outlook Lowered

January 31, 2014

Bad weather and a reduction in food stamps led to weaker-than-expected sales at Walmart and Sam's Club, which combined with greater-than-expected international expense, prompted an uncharacteristic pre-announcement from the company that fourth quarter profits would be worse than expected.

Walmart said its earnings per share adjusted to exclude several non-recurring and greater-than-expected expenses related to international operations would be below the low end of a previously provided forecast of $1.60 to $1.70 and full year earnings per share would be below earlier guidance in the range of $5.11 to $5.21.

The earnings miss for the quarterly period ended January 31 was attributed to a number of factors.  In the U.S., same-store sales at Walmart stores ad Sam's Club are both expected to be slightly negative, according to Walmart CFO Charles Holley, compared to earlier guidance which called for comps at Walmart to be roughly flat and comps at Sam's in the range of flat to 2%.

"Despite a holiday season that delivered positive comps, two factors contributed to lower comp sales performance for the 14-week period for Walmart U.S.," Holley said.  "First, the sales impact from the reduction in SNAP (the U.S. government Supplemental Nutrition Assistance Program) benefits that went into effect November 1 is greater than we expected.  And, second, eight named winter storms resulted in store closures that impacted traffic throughout the quarter.  Sam's Club was also impacted by the weather throughout the quarter."

The pre-announcement by Walmart is unfamiliar territory for a company accustomed to meeting or exceeding its forecasts.  It also marks an inauspicious beginning to a new leadership era at the world's largest retailer.  Walmart International president and CEO Doug McMillon assumes the role of president and CEO of Walmart Stores on February 1 when current president and CEO Mike Duke steps down.

Walmart is scheduled to report fourth-quarter results on February 20.

 Source: Retailing Today

New Study Touts Why California Wins With Walmart

January 30, 2014

Walmart Supercenters in California benefit communities by supporting additional job creation, small business growth and more robust sales tax revenues, according to a new economic impact report.

The study was conducted by economist Lon Hatamiya of the Hatamiya Group and the results were announced by Walmart.  Key findings of the study show the following:

• On average, California communities with Walmart Supercenters fared far better on taxable retail sales than those communities without Walmart Supercenters.
• Total taxable retail sales in California communities with Walmart supercenters increased by an average of 20.3% after the opening of those stores.
• Total taxable retail sales in California communities without Walmart Supercenters decreased by an average of 11.7% over the same time period.
• On average, California communities with Walmart Supercenters experienced even stronger gains in the number of retail business permits issued than those communities without supercenters.
• Total retail business permits in California communities with Walmart Supercenters increased by an average of 48.5% arfter the opening of those stores.
• Total retail business permits in California communities without Walmart Supercenters also increased, but only by an average of 20.3% over the same time period.

"I first launched this study in 2008 and found similar results," study author Hatamiya said in a press release distributed by Walmart.  "I added an element to the current version by looking at communities without Walmart Supercenters and comparing the results.  It's clear that communities with a Walmart Supercenter experience overall positive economic benefits to a local economy when compared to a community without a Walmart Supercenter."

 Source: Retailing Today

Doug McMillon Elected New Chief Executive Officer of Wal-Mart Stores, Inc.

Bentonville, Ark., November 25, 2013 – Wal-Mart Stores, Inc. (NYSE: WMT) today announced that its board of directors elected company veteran Doug McMillon, 47, to succeed Mike Duke, 63, as president and chief executive officer, effective February 1, 2014. McMillon was also elected to the company’s board of directors, effective immediately.

“This leadership change comes at a time of strength and growth at Walmart,” said Rob Walton, chairman of Walmart’s board of directors. “The company has the right strategy to serve the changing customer around the world, and Doug has been actively involved in this process. The company has a strong management team to execute that strategy.”

Walton continued, “Doug is uniquely positioned to lead our growing global company and to serve the changing customer, while remaining true to our culture and values. He has broad experience – with successful senior leadership roles in all of Walmart’s business segments – and a deep understanding of the economic, social and technological trends shaping our world. A merchant at heart, Doug has both a long history with our company and a keen sense of where our customers globally are heading next. He has also shown strong leadership on environmental sustainability and a commitment to using Walmart’s size and scale to make a difference in the lives of people, wherever they might be.”

“The opportunity to lead Walmart is a great privilege,” McMillon said. “Our company has a rich history of delivering value to customers across the globe and, as their needs grow and change, we will be there to serve them. Our management team is talented and experienced, and our strategy gives me confidence that our future is bright. By keeping our promise to customers, we will drive shareholder value, create opportunity for our associates and grow our business.”   

“Mike put in place the building blocks for the next generation Walmart and today the company is stronger, more global and more unified across all our stores, mobile and online,” said Walton.  “He also reinvigorated the productivity loop and delivered strong financial performance. During his tenure the company made critical investments in talent and technology to expand Walmart to even more customers globally and stepped up its progress on social and environmental issues.  Mike also has a strong commitment to diversity, and has been especially engaged in advancing women throughout organization. He set a tone at the top to never be satisfied, to always accelerate and do better, while remaining true to the culture that has been core to the company’s success.”

“This is a great company and it has been an honor to help advance Sam Walton’s vision of giving people around the world a better life,” said Duke. “Our associates make it all possible and I’ve learned so much from them. No matter where I traveled, our associates continued to inspire me with their commitment to living our values, serving our customers and taking care of each other.”

Duke will continue serving as chairman of the executive committee of the board and, in the tradition of his predecessors, stay on as an advisor to McMillon for one year. The company plans to make an announcement on McMillon’s successor as CEO of Walmart International by the end of the fiscal year.

NOTE: Bios of Doug McMillon and Mike Duke are available at: http://corporate.walmart.com. A high resolution photo of Doug McMillon is also available for downloading from the site.

Walmart Plows Forward in 2Q

A fourth consecutive quarter of same store sales growth at Walmart's U.S. business helped the company achieve a slightly better than expected profit performance.

Second quarter earnings grew 8.3% to $1.18, one cent better than the consensus estimate of analysts and at the top of the company's forecast range of $1.13 to $1.18.  Total company sales increased 4.5% to $113.5 billion, and net income increased 5.7% to slightly more than $4 billion.  The key driver of the improved performance was continued strength of the Walmart U.S. business where same store sales increased 2.2%, within the company's guidance range calling for an increase of 1% to 3%.

"I'm really pleased with the continued momentum we see in our Walmart U.S. stores, and this now marks three consecutive quarters of positive comp trafic and four quarters of positive comp sales," said Wal-Mart Stores president and CEO Mike Duke.  "There's such a clear focus among the leadership team to drive the strategy of broad assortment and price leadership.  We continue to win back customers and attract new ones.  We will not let up on our passion to reduce operating expenses so that we can invest in lower prices.  This is the promise that our customers expect from Walmart and what drives greater loyalty."

Sales at U.S. stores grew 3.8% to $67.4 billion, while operating profits increased 5.3% to $5.25 billion.

"Customers are responding to our continued focus on providing the right assortment at everyday low prices," said Walmart U.S. president and CEO Bill Simon.  "During the quarter, our average comp traffic increase was equal to serving an average of 80,000 additional customers every day of the 13-week period."

"We believe that the improvements in our quality and overall merchandise offerings are key to driving these results," said Sam's Club president and CEO Rosalind Brewer.  "In fact, member engagement scores continue to achieve record levels.  We're also investing in price to deliver greater value on top of these quality improvements."

Internationally, sales increased 6.4% on a constant currency basis to $32 billion and operating profits increased 5.4% to nearly $1.5 billion.  A strengthening of the U.S. dollar had a major impact on the comparisons to the prior year.  On a constant currency basis sales would have increased by 7.2% to $32.3 billion and operating profits would have increased 11.9% to $1.6 billion.

"Every market delivered positive comps, and I'm pleased that our largest markets, the United Kingdom, Mexico and Canada, collectively delivered stable growth, solid margins and expense leverage, despite challenging environments," said Walmart International president and CEO Doug McMillon.

Walmart increased by a penny and narrowed its full year profit forecast to a range of $4.83 to $4.93 from a prior range of $4.72 to $4.92.

Source: retailingtoday.com

Cheers for Walmart at 50

Walmart observed its 50th anniversary in fine fashion this week as its share price hit an all-time high.

Walmart shares closed Tuesday at an all time high of $70.75, nearly 18% above the $59.97 level where they began the year and more than 46% above the 52-week low price of $48.31 seen late last summer. The move is nothing short of remarkable considering an investment in Walmart was dead money for the past dozen years as shares traded for a little more than $69 back in December 1999.

The recent run up comes as Walmart has logged three consecutive quarters of accelerating same store sales growth. Analysts are optimistic the company continues to experience favorable sales trends during the second quarter, especially in its U.S. stores, as merchandising initiatives to broaden assortment and more effective marketing around a familiar low price message are gaining traction, just as moderating gas prices are leaving the company’s core shoppers with more money to spend.

The company’s improved stock price performance also is likely having an intangible effect on employee morale in stores, where the stock price is posted in common areas each day, and at the company’s home office.

Source: retailingtoday.com

Walmart web traffic surges in May

Online measurement firm comScore is out with its top 50 web properties report and Walmart.com must be doing something right, judging from a surge in traffic.

Walmart.com was ranked 24th on the top 50 list for May, with 42.4 million unique visitors, a 9% increase from the prior month when comScore showed Walmart.com had 38.8 million unique visitors in April. The gain in web traffic over the same month the prior year is even more substantial, as Walmart.com registered a 26.2% increase from a May 2011 unique visitor total of 33.6 million.

As for Amazon.com, the company Walmart.com is continually measured against, it continues to attract more than double the number of unique monthly visitors as Walmart.com, but its traffic situation looks very different. For starters, comScore shows May traffic at Amazon.com registered 99.4 million visitors, down from 101 million visitors in April. When compared with the same month the prior year, Amazon.com’s unique monthly visitor total increased a modest 4.7% rate, according to comScore data.

Source: retailingtoday.com

Walmart Q1 comps gain 2.6%

First quarter profits at Walmart exceeded analysts’ estimates, as same-store sales increased 2.6%, and the company said its strategy of low prices on a broad merchandise assortment is resonating again with shoppers.

Sales for the quarter increased 8.6% to $112.3 billion, compared with $103.4 billion in the first quarter last year. The results would have been even stronger, except for an approximately $800 million headwind related to a negative currency exchange rate. Earnings per share of $1.09 were a nickel ahead of analysts’ estimates and three cents higher than the top end of the company’s guidance of $1.01 to $1.06.

“Our overall performance reflects the success of Walmart’s business model: driving the productivity loop, leveraging expenses and investing in price leadership,” said Wal-Mart Stores president and CEO Mike Duke. “We believe that the momentum throughout our business positions us very well for the rest of the year.”

Strength was evident across all three of the company’s business segments, but it was the performance of the U.S. group that stood out, thanks to a 2.6% same store sales increase that exceed the company’s flat to 2% guidance range and marked the third consecutive quarter of U.S. comp improvement. Total U.S. sales increased 5.9% to $66.3 billion.

“In a highly competitive retail environment, Walmart U.S. is increasing price separation across categories and driving increased traffic to both the grocery and general merchandise areas of our stores,” Duke said.

Source: retailingtoday.com