Wal-Mart’s worries not unique - The Packer

Wal-Mart’s worries not unique

07/08/2014 10:17:00 AM
Tom Karst

Tom KarstIs Wal-Mart worried?

One of the trending stories in the world of supermarkets is the future of Wal-Mart. Coverage of the company this morning notes possible new directions, as the global chain’s chief executive officer strategizes how to grow the company. Bottom line, it isn’t easy to keep growing when you are the biggest.

From Yahoo.com news and 24/7WallStreet, Douglas A. McIntyre penned this piece "Where are Wal-Mart’s customers going?" about Wal-Mart U.S. chief executive officer Bill Simon’s recent comments that the improving job market hasn’t helped the chain. The analysis offers that this fact could mean consumers are holding back on spending, not trusting the solidity of the recovery just yet. The other option is that Wal-Mart’s shoppers are slowly leaving the chain to shop elsewhere. If true, this slow exodus won’t knock Wal-Mart from its top perch anytime soon, but are the glory days over?

Another story about Wal-Mart this morning, authored by Shelly Banjo of The Wall Street Journal, declares that “Wal-Mart embracing smaller stores in growth strategy” 

The piece talks about Wal-Mart’s “double sorrow” of sluggish sales and traffic.

Net sales for the Wal-Mart U.S. segment increased 2% for the three months ended April 30 compared with year-ago numbers. The increase in net sales was due to year-over-year growth in retail square feet of 2.8%, partially offset by a decrease in comparable store sales of 0.4%

Wal-Mart chief executive officer Doug McMillon’s aggressive strategy to grow online sales and boost openings of smaller format Wal-Mart Express and Neighborhood Market concepts is unnerving some analysts. Will thousands of supercenters suddenly become yesterday’s model?

Can Wal-Mart grow in the years ahead? How dedicated is the chain to improving demand for its fresh fruit and vegetable offerings in the context of all store formats. Will the smaller format store cannibalize food sales at supercenters?

Wal-Mart is a market-moving buyer of fresh produce already. How will Wal-Mart’s footprint in the fresh produce industry change in the next five to ten years? Will it hold about the same, increase or decrease?

Willard Bishop’s recent White Paper called “The Future of Food Retailing” observed that in 2013 fresh format stores (Whole Foods, The Fresh Market, Whole Foods) registered sales gains of 10.4% to $14 billion.

Limited assortment stores (headlined by Aldi) grew at a 4.1% pace to $31.1 billion. The report observed that Aldi plants to open 650 new stores over the next five years.

Likewise, the Dollar format stores showed food sales gains of nearly 9% in 2013, with food and consumable sales at better than $28 billion.

Store counts of dollar food stores grew 5.2% to more than 27,000 stores last year, and Family Dollar and Dollar General are both poised to expand further in the years ahead.

 Led by the efforts of Amazon, e-commerce food and consumable sales grew by 13.7% in 2013, the Willard Bishop report said, with sales in 2013 at $18.2 billion. Traditional supermarkets also are ramping up for more online sales, so online food sales will continue to grow.

On the other side of the ledger, the Willard Bishop report said traditional supermarkets had a modest sales increase of 0.4% to $444.2 billion.

Supercenter sales grew 4% to reach $200 billion in sales, but Wal-Mart, Target and Kmart all had same store sales declines.

Even with the same store struggles of Wal-Mart, Willard Bishop predicts that the market share for the supercenter format will grow from 17.6% in 2013 to 19.4% in 2018.

Fresh format sales will grow from 1.2% to 2.1%, and limited assortment store sales will climb from 2.7% to 3.4%.

While Wal-Mart has reason to be worried, traditional supermarkets should be the most alarmed; Willard Bishop predicts a market share decline from 39.1% in 2013 to 36.2% in 2018.



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Cole    
Oklahoma City  |  July, 09, 2014 at 01:24 PM

Until Walmart deals with the slow check out times they will not grow.

Tom K    
KC  |  July, 10, 2014 at 05:37 PM

Cole, Interesting point. Often when I go in Wal Mart, many of the lanes are closed, without cashiers. Tom K

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