Wal-Mart reports mixed results, drops expectations

08/15/2013 11:15:00 AM
Coral Beach

Wal-Mart produce employeeCourtesy Wal-MartAn employee restocks apples in a Wal-Mart produce department. Corporate executives reported single-digit growth in fresh produce sales for the second quarter of 2013 in the chain's U.S. storesProfits and revenue for Wal-Mart Stores Inc. were both up more than 2% for the second quarter, but fell short of projections and caused the retailer to lower expectations for the rest of the year, despite strong performance in the e-commerce arena and growth in fresh produce sales.

Executives for the Bentonville-Ark.-based retailer reported second-quarter details in a recorded conference call Aug. 15. They said same-store sales for the second quarter were flat compared to a 2.5% increase in the second quarter of 2012.

Charles Holley, chief financial officer, said the full-year expectations for net sales growth is being lowered to the 2%- to 3%-range, down from 5% to 6% projected earlier this year.

For the quarter ending July 31, Wal-Mart reported a profit of $4.07 billion, up from $4.02 billion for the same period in 2012. Revenue increased 2.3% to $116.95 billion, which was short of the $118.47 billion estimate from analysts, according to the Wall Street Journal.

The retailer’s chief executive officer, however, said he is optimistic.

“I’m encouraged by our position to execute in the second half of the year, particularly with the steps we’re taking to improve performance,” president and CEO Mike Duke said on the call.

Wal-Mart's 100% money back guarantee on fresh produce is just one of the strategies the retailer is using to encourage sales of fresh foods.Pushing produce

One of those steps is continued focus on fresh foods, including produce in U.S. stores. Bill Simon, chief executive officer for Wal-Mart U.S., said fresh produce sales continue to gain momentum in the U.S. with “strong mid single-digit” growth in the second quarter.

“We’re getting more efficient at transporting the product from farm to shelf,” Simon said during the call.

“We’re executing weekly store audits and equipping associates with additional skills and tools to ensure quality and freshness … we saw consistently improving comps (same-store sales) in produce throughout the quarter with a high single-digit (increase) in July,” Simon said during the call.

Produce sales at Sam’s Club stores are also increasing in the single-digit range, said Rosaline Brewer, president and chief executive officer for Sam’s Club.

“Lingering effects of unseasonably cold weather affected produce availability in some of our key summer fruit items, such as strawberries and watermelons,” Brewer said during the call. “We overcame this headwind with exceptional quality in other seasonal produce items such as blueberries and apples.”

On the mark online

In the e-commerce arena, Wal-Mart saw global sales increase more than 30% in the first half of 2013, compared with 2013.

Simon said the company launched a locker test site in the Washington D.C. area that is receiving 90% positive feedback from customers. He said response to the “ship from store” program that offers delivery in two days has also been positive.

Neil Ashe, head of Wal-Mart’s global e-commerce initiative, said the retailer has doubled the number of products available on walmart.com in the first half of 2013 and plans to double that number again by the end of the fourth quarter. The “pick up today” program has triple the number of items available and is seeing increased consumer participation.

A pilot of a grocery delivery program in California’s San Francisco and San José markets is receiving high marks from customers. Ashe said 83% of customers said they would recommend the program to others. The program is securing new customers, also. Ashe reported 75% of those who used the pilot service said they would have used another retailer if the delivery option was not available.

Internationally, the retailer’s e-commerce business is logging huge growth numbers with a tenfold increase in mobile sales in China during the first half of 2012. Ashe said Latin America and South America are also embracing online shopping, with the Wal-Mart site being the largest e-commerce website in that country.

New stores opening

The multi-national retailer continues to increase its presence in the U.S., Simon said.

In the second quarter the retailer added 49 new “units” Simon said, which translates into 4.1 million incremental square feet. Of those stores, 29 are supercenters and 35 are small-store formats including Neighborhood Markets and Express stores.

The 2013 second quarter saw the retailer open more new Neighborhood Markets than any other single quarter. In a single day during the quarter a dozen of the smaller format stores opened.

“In the third quarter, we’re planning to open approximately 90 units, representing 7 million additional square feet,” Simon said.



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