Wal-Mart Cites Grocery Gains

Grocery sales, including improvements in the perishables offering, were a source of strength at Wal-Mart Stores during the second quarter, the company, based here, said last week. The retail giant also noted that comp-store sales at its Neighborhood Market banner a traditional supermarket format with about 150 locations were up 3.8% for the period, despite a decline in comp-store

BENTONVILLE, Ark. — Grocery sales, including improvements in the perishables offering, were a source of strength at Wal-Mart Stores during the second quarter, the company, based here, said last week.

The retail giant also noted that comp-store sales at its Neighborhood Market banner — a traditional supermarket format with about 150 locations — were up 3.8% for the period, despite a decline in comp-store sales for Wal-Mart's U.S. division overall.

In addition, sales of food and health and wellness products across all stores in the U.S. division delivered positive comps that were “ahead of competitors.” Overall comps in the U.S. for the 13-week quarter, which ended July 31, were down 1.5%, Wal-Mart said.

“Our underlying business remains strong, with positive traffic driving a continuation of market share gains,” said Eduardo Castro-Wright, vice chairman, in a pre-recorded call for investors. “We have now experienced those gains for several quarters.”

He said that although sales in the U.S. were below expectations, operational discipline helped drive a 5% gain in operating income, to $4.9 billion. Top-line sales for the U.S. division rose 0.3%, to $64.21 billion.

Castro-Wright explained that the income gains were driven in part by strong inventory controls, including improvements in perishables distribution.

“The strength of our logistics and transportation systems, along with lower fuel prices vs. last year is reflected in the margin improvements,” he said, noting that case productivity increased by 9% over year-ago levels.

“I'm also pleased with how the investment in merchandising systems and processes is driving product quality in our fresh areas,” he said. “We have greatly improved the flow of perishables into our stores, which has reduced damaged goods. Further, customers are giving us a lot of credit for improving the quality of our fresh offerings, and their perceptions are validated in our higher sales comps in grocery.”

The efforts are part of the company's Project Impact initiative, a sweeping effort that includes store remodels and streamlined vendor relationships, as reported in depth in the June 29 issue of SN.

Castro-Wright said the company has completed about half of its goal for store remodels for the year, and sales at remodeled stores are “exceeding internal models” by about 100-125 basis points.

“Despite the initial disruption during the remodel, improvements in customer experience after remodel are growing at twice the rate of the rest of the chain,” he said. “Also an important outcome is that Project Impact remodels are helping us attract new customers.”

Wal-Mart overall, including its Sam's Club business and the international operations, said net income for the second quarter was flat at about $3.55 billion. Sales for the second quarter fell by 1.4%, to $100.1 billion, but were up by 2.7% at constant currency exchange rates.