Wal-Mart: Comps Improving

Wal-Mart: Comps Improving

BENTONVILLE, Ark. Wal-Mart Stores here said last week comparable sales at its U.S. locations were positive in July, August and September, though company officials stopped short of indicating whether its third quarter would end a string of 10 straight quarters of negative comps. July was part of the second quarter, and while comps were positive for the two months that followed, the company said it

BENTONVILLE, Ark. — Wal-Mart Stores [4] here said last week comparable sales at its U.S. locations were positive in July, August and September, though company officials stopped short of indicating whether its third quarter would end a string of 10 straight quarters of negative comps.

July was part of the second quarter, and while comps were positive for the two months that followed, the company said it has not indicated what comps were for October — information that will be reported along with third-quarter results on Nov. 15.

The company said traffic is trending better but is still not positive.

“We've made substantial [sales] progress in our U.S. business,” Bill Simon, president and chief executive officer of U.S. stores, said, “and while the transition is not coming as fast as we would like, our initiatives are starting to take hold, and progress is now visible.

“For example, efforts like adding back assortments and bringing back Action Alley have delivered improvements of 75 to 100 basis points — led by food, which has seen a 100-basis-point improvement.”

Mike Duke [5], president and CEO of Wal-Mart Stores, said the company plans to reduce expenses as a percentage of sales over the next five years by 100 basis points or more and to lower gross margins, with most of the savings invested in lower prices.

In terms of store growth, Wal-Mart plans to become more aggressive in opening new stores in areas where it already has medium to high market shares in an effort to avoid cannibalization by competing stores, the company said.

“Cannibalization can impact us,” Simon pointed out. “For example, in the Dallas-Fort Worth market, we had a great market share, but when we slowed growth to avoid self-cannibalization, the competition grew by 300 openings.

“So the choice is to cannibalize ourselves or get eaten up by someone else, and we've determined we need to build a competitive number of stores in some of our strong markets to grow our share.”

Karen Roberts, president of Walmart Realty, said the company plans to open new supercenters next year in some of its strongest markets, including Tulsa, Oklahoma City and Baton Rouge. Wal-Mart also plans to add six more Walmart Express locations this year to the five it already has, “with a further rollout dependent on what we learn,” Roberts said.

The chain's five Express units — stores of 10,000 to 15,000 square feet, with 13,500 SKUs — include three in northwest Arkansas and one each in North Carolina and Chicago.

Simon said Wal-Mart expects to open approximately 20 more Express stores next year, including several units in an undisclosed high-density market, “to see how they perform against each other and how competition reacts.”

Overall, Wal-Mart said it expects to allocate $13 billion to $14 billion a year for capital expenditures in fiscal 2012 and 2013, compared with $12.7 billion this year.

It plans to open between 117 and 120 large-format stores next year and 130 to 135 the following year, compared with 153 this year, including 43 upgrades to supercenters; 24 to 30 medium and small-format stores next year and between 80 and 100 more in 2013, compared with one this year; and eight to 10 Sam's Clubs in 2012 and 10 to 15 in 2013, compared with nine this year.

In a separate presentation during the daylong meeting, Eduardo Castro-Wright, vice chairman, said Wal-Mart is testing same-day food deliveries at a single store in the San Francisco area. “We've had terrific results since we launched it several months ago, with 70%-plus repeat business, which is an awesome number.

“But whether we expand it to 10 stores or 1,000 stores depends on whether we can make money from it.”