Walmart Customers Sticking to Necessities

BENTONVILLE, ARK. - Walmart U.S. customers are still scrimping to make ends meet, trading down and foregoing discretionary purchases - resulting in a comp decline of mid-single digits for the home department.
     While the outdoor living department some saw improvement during the second quarter, "there appears to have been a trade-off in indoor living categories," Bill Simon, president and ceo of Walmart U.S., told analysts during the company's quarterly conference call earlier this month. "Customers are opting out of décor items for their homes, or they're trading down."
     By contrast, the home department at Sam's Club generated a single-digit comp gain, with domestics, kitchen electrics and housewares cited as strong performers.
     Price inflation in food has supplanted worries about gas prices for Walmart U.S. customers, and the retailer is focusing on its pricing, according to Mike Duke, president and ceo of Wal-Mart Stores Inc.
     "I've recently observed several focus groups, and it's clear many consumers are still struggling," he said.
     He added: "There certainly are many reports on Walmart pricing, and the fact is that the gap has narrowed in some cases. We're committed to widening the gap on price, and we have a specific plan and timetable to deliver EDLP to every customer."
     Operating income for Walmart US rose 2.1% to $4.985 billion in the quarter ended July 31. Sales eked out a 0.4% gain to reach $64.9 billion. Comps, excluding fuel, dipped 0.9%, within the range of Walmart's expectations.
     Operating income for Sam's Club rose 15.0% to $492 million during the quarter. Sales climbed 9.5% to $13.6 billion. Comps, excluding fuel, rose 5.0%.
     Corporate earnings per share rose 12.4% to $1.09, near the high end of its guidance. Sales rose 5.5% to $108.6 billion. Total U.S. comps, excluding fuel, were flat.

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