Wal-Mart Stores has focused its investment in pricing on the grocery aisle as it looks to grow customer traffic and loyalty in the US.
The world’s largest retailer today (17 May) unveiled its “best” US quarterly performance in six years when it booked a 2.6% increase in same-store sales. Higher consumer traffic and bigger basket size, up 1.1% and 1.5% respectively, contributed to the result.
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Speaking during a conference call following the announcement, Bill Simon, president and CEO of Wal-Mart’s US operations, attributed the gains to the group’s “core strategy” of delivering the “right assortment” at the “right time” and for the “lowest price”.
Simon said the company reduced its gross profit “as planned” in order to drive traffic by lowering prices.
“Our core strategy has been focused on re-energizing the productivity loop. We lower our costs in order to lower our prices, so we can give customers a great assortment at the lowest prices. It’s a fairly simple concept, but one that’s critically important to our customers, particularly in challenging economic times,” he said.
Simon said the sales performance of the company’s namesake US stores was “supported by price investment”, which was made “primarily in food and consumables”.
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By GlobalDataPrice was the focus of Wal-Mart’s first-quarter marketing and Simon revealed it will continue to be a “key message” this year with the introduction of “low price guarantee commercials”.
However, Wal-Mart’s food strategy is about more than just delivering low prices, Simon suggested. During the quarter, Wal-Mart also expanded its food assortment and “heightened” its focus on “local relevance and innovation”, he added. “And it’s paying off,” Simon insisted.
Simon, meanwhile, indicated this focus resulted in higher grocery sales during the period, with the category delivering “a low single-digit positive comp” while also “driving additional traffic to the box”.
While grocery inflation – which stood at about 3% – did contribute to these gains, Simon said the net impact of inflation was reduced by between 50 and 150 basis points as customers traded down to lower price point and smaller pack size.
Commenting on the result, analysts at Janney Capital Management said Wal-Mart had turned in the “best quarter in recent memory”.
“The upside came from stronger comps as better merchandising in US stores combined with the benefit of favourable weather and moderating, but still positive inflation – all combined for the highest US comp in years, with the best traffic results in a long time,” the analysts wrote in a note to investors.
Shares in Wal-Mart were up 4.87% at 12.30 ET.
