The publication of first-quarter numbers rumbles on this week, with eyes turning to the latest financial performance at Wal-Mart, the world’s largest retailer.
Profits are expected to rise, with Wal-Mart succeeding in keeping costs down but retail watchers will be looking to see if the US retail giant has had any luck in reversing seven straight quarters of falling sales from outlets open at least a year.
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The signs are that Wal-Mart will in fact report an eighth straight quarter of lower comparable-store sales in the US and analysts will be keen to hear about the retailer’s moves to rejuvenate the top line. The retailer has already rowed back from its 2009 move to pull thousands of lines from its US stores. The plan did not work – the rationalisation was said to have driven consumers away – and, in April, Wal-Mart launched an ad campaign to tell shoppers that 8,500 lines were being re-introduced to its shelves. The move also included Wal-Mart’s attempt to underline its value credentials with a new slogan – Low Prices. Every day. On everything – in a bid to entice cautious consumers.
These moves, combined with plans to open smaller Wal-Mart Express outlets in rural and urban areas and to invest in building a multi-channel model (last month, Wal-Mart launched a pilot online grocery service), are encouraging but Wall Street will want to know more detail about the plans – and how quickly the retailer believes they can have a positive impact on the business. And, clearly, the size of Wal-Mart means that any indication it can give on consumer confidence in the US will be closely watched not just by retail pundits but by business commentators across the country’s economy.
Wal-Mart’s international operations continue to be, in president and CEO Mike Duke’s words, the retailer’s “growth engine”. India, Chile, Mexico and China are four of the countries where Wal-Mart has announced investment in 2011. The company’s international sales rose 12% last year and Duke said in February that he expects “accelerated” growth in “emerging markets” this year.
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One emerging market that Wal-Mart is looking to enter is South Africa, where the company is looking to buy a majority stake in local retailer Massmart. Wal-Mart first announced a deal in September, when it revealed plans to buy the whole business. By November, after talks with Massmart shareholders, Wal-Mart scaled back its bid and tabled an offer for 51% of the retailer.
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By GlobalDataSeven months on and even that investment has yet to be formally approved by South African regulators. Today, a tribunal set up to investigate the deal will hear closing arguments from Wal-Mart, Massmart and opponents of the deal. Critics, which include parts of South Africa’s government, argue that Wal-Mart’s entry into the country will hurt its local manufacturing sector. The tribunal is set to give its verdict in the next two weeks.
And, of course, a key plank of Wal-Mart’s international operations is Asda. Last week, Sainsbury’s, the UK’s third-largest retailer, which is battling for second spot behind Tesco with Asda, announced its annual results. Parts of the City were concerned about the impact the weak consumer in the UK and fierce price competition was having on Sainsbury’s margins.
Being part of Wal-Mart, Asda does not have to provide as much information on its financial performance as its listed rivals but, like its parent company in the US, after a challenging 18 months, it will be interesting to hear how Asda is navigating the tough trading environment in the UK.
