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Walmart U.S. sees momentum in home during 2Q

Overall results for the quarter were flat

Bentonville, Ark. – Home continues to shine at Walmart U.S. stores, and the company credits proprietary brands like better Homes & Gardens as well as efforts to better position and “transform” the merchandise assortment.

During Wal-Mart Stores Inc.’s second quarter earnings presentation this morning, vice-chairman Eduardo Castro-Wright commented on home’s “strengthened sales momentum” lately and how sales of proprietary brands like Better Homes & Gardens as well as Canopy, Mainstays and recent teen-brand addition Your Zone, “continue to grow ahead of comps reported by leading competitors.”

He continued, “Our sales in kitchen, dining and food preparation products continue to be strong. In fact, when we compare our monthly home performance to what other retailers are reporting on monthly sales day, we believe we continue to gain significant share in this business.”

On a related note, Walmart U.S.’s back-to-college program is being received “very positively” for its coordinate color program, and the seasonal category’s comps are running in the mid double digits, ahead of last year, Castro-Wright said.

“Based on the industry reports on back-to-school, we believe we are gaining significant share of this sizable business. Although it is a tough sales environment, we are pleased with the initial response to our back-to-school and back-to-college offerings. Now, like it has been the case for several seasons, customers are shopping much closer to the event. We are focused on delivering on our ‘save money’ promise on top brands,” he said, in school supplies, electronics, apparel and home products.

The second quarter overall for the company was positive, considering the challenging retail environment, said Mike Duke, president and ceo, Wal-Mart Stores Inc.

“I feel our performance during the second quarter was particularly good, given a very challenging economy all over the world,” Duke said. “I’m pleased to report that our earnings per share came in at 88 cents -- right at the top of the guidance we provided three months ago – and we exceeded analyst consensus estimates.”

For the second quarter ended July 31, parent company Wal-Mart Stores Inc.’s profit was essentially flat at $3.44 billion, or 88 cents a share, compared to last year’s second quarter net income of $3.45 billion, or 87 cents a share. Total sales fell 1.4% to $1001.1 billion. Without the negative impact of currency exchange rates equal to $4.199 billion, net sales for the quarter rose 2.7% to approximately $104.281 billion.

Sales at Walmart U.S. were also flat – $64.2 billion, up 0.34%. Comps declined 1.5%, below expectations.

Year to date, sales increased 2.0% to $125.5 billion, with comps up 1%.

“Walmart U.S. reduced inventory by almost 6%, and that’s on top of several quarters of consistent inventory improvement,” Duke said.

Added Castro-Wright: “This equates to about $1.4 billion less inventory than this time last year. Lower inventory has been a major reason for profit performance.”

Although Sam’s Club reported sales declines for both the quarter and the first half, Duke said, “traffic is higher than this time last year, and we’re improving our market position in the club sector.”

Sam’s sales fell 3.2% to $11.9 billion during the quarter. Excluding the impact of lower fuel prices, Sam’s would have increased sales by 1.7%.

Excluding fuel, Sam’s comp for the quarter was a flat 0.6%, within the company’s guidance. Including fuel, comp fell 4.3%.

First half sales at Sam’s declined 2.4% to $22.9 billion. Comps were down 2.5% with fuel, up 2.3% without.

Looking ahead, both Walmart and Sam’s are engineering initiatives to gain more consumer traction at their respective units.

At Walmart, the rollout of this year’s remodeling program accelerated in the second quarter and will continue through October, the goal being to hit almost 650 stores. Titled Project Impact, the strategy includes all new construction and about 500 existing stores, some of which are expansions and relocations.

Castro-Wright said Walmart is bracing for the economy to remain difficult, citing the results from the retailer’s customer surveys, which “point to ongoing concerns by consumers about their own financial situation. More people are concerned about unemployment. Because of that, we will continue to be focused on our price leadership message, which is so important in these times.”

With that said, Walmart U.S. estimates that comp sales for the 13-week period from August 1 through October 30 to be between flat and 2.0%.

“We believe we have a strategic framework in place that will continue to help offset an economy that will be challenging the rest of this year,” he concluded.

Sam’s Club is working on initiatives “to drive future efficiencies,” said Brian Cornell, president and ceo.

“Sam’s will continue to elevate its focus on using consumer and member insights to guide our business,” he said. “We will step up the relevancy, uniqueness and quality of Sam’s merchandise assortment – always at a superior value and with a ‘best-in-class’ club experience. We will share more details with you in October.”

 

 

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