Wal-Mart Stores Inc. reported its eighth consecutive quarterly sales decline for the U.S., as surging gasoline prices and high unemployment pushed consumers to discounted items and cheaper private-label products.
“We saw continued pressure from ongoing macroeconomic conditions, as customers continued to trade down,” Bill Simon, chief executive of the retailer’s U.S. operations, said during a pre-recorded conference call released May 17 with quarterly financial results.
“Rising gas prices, high unemployment and increasing inflation continue to be the most important issues facing our customers today,” Simon said, according to a transcript of the call. Many Wal-Mart customers are consolidating shopping trips to save money on fuel, he said.
Wal-Mart’s U.S. sales sagged over the past two years as the economy recovered slowly from the 2008-09 recession and consumers increasingly sought bargains at dollar stores and other discounters. More recently, pump gasoline near or above $4 a gallon has squeezed Wal-Mart’s customers.
Comparable U.S. store sales excluding gasoline fell 1.1% during the 13 weeks ended April 29 compared with the same period a year earlier, Bentonville, Ark.-based Wal-Mart said May 17. The sales figure excludes Sam’s Club, Wal-Mart’s warehouse store chain.
Grocery side a bright spot
As in previous quarters, Wal-Mart singled out its grocery business as a bright spot. Groceries posted a low single-digit comparable-store sales increase, in percentage terms, during the quarter, Simon said.
“Our food business is delivering positive sales growth that’s on par with the top competitors,” Simon said during the call.
Wal-Mart also is raising prices for some food items to recover rising costs. Grocery inflation during the quarter was about 1%, “with the greatest impact on perishables,” Simon said.
As the largest U.S. food retailer, Wal-Mart is a major buyer of fruits, vegetables and other fresh foods. In the 12 months ended January 31, groceries accounted for 54% of Wal-Mart’s U.S. sales, or nearly $141 billion, according to a recent company filing.
Based on industrywide averages, Wal-Mart’s U.S. fresh produce sales probably generate $14.5 billion to $15.5 billion a year, consultant Bruce Peterson estimated. Peterson is president of Fayetteville, Ark.-based Peterson Insights and formerly was senior vice president and general merchandise manager of perishables at Wal-Mart.
Turnaround may be soon
Wal-Mart’s sales slump may end during the current quarter, Simon indicated. Wal-Mart said it expects comparable store sales for the quarter that ends in July to range between a decline of 1% and a rise of 1%. A widely followed gauge of retailer performance, comparable store sales typically reflect locations open at least a year.
“We’re monitoring the economic environment carefully, as significant changes in gas prices and inflation during the quarter will influence our actual performance,” Simon said.
Gasoline prices soared this year as turmoil in Libya and other top petroleum countries of North Africa and the Middle East sent crude oil above $110 a barrel. Earlier this week, regular-grade gasoline averaged $3.94 a gallon nationwide, up 37% from $2.87 a year ago, according to AAA, the auto trade association.
Wal-Mart still had better-than-expected quarterly results, with net income rising 3.9% amid stronger international sales.
During the three months ending April 29, Wal-Mart’s fiscal 2012 first quarter, net income rose to $3.43 billion from $3.3 billion a year earlier. Per-share earnings of 97 cents surpassed the average analyst estimate by about 2 cents, according to Yahoo! Finance.
Wal-Mart’s total revenue rose 4.3% to $103.4 billion.