US retail giant Wal-Mart Stores delivered a 4.5% increase in total sales during the second quarter, with gains driven by higher same-store sales in every market that the group operates in.
The company revealed this morning (16 August) that net sales rose to $113.5bn in the three months to 31 July. Stripping out the negative impact of currency exchange, the group would have booked sales of $115,7bn, the group emphasised.
Commenting on the results during an investor conference call, CEO Mike Duke said that he was “really proud” of the company’s underlying performance, which saw comparable sales gains across the board.
In the US, Wal-Mart continued to benefit from the down economy through its focus on EDLP. Comparative sales were up 2.2% in the country, marking Wal-Mart’s fourth consecutive quarter of same-store sales growth.
Comparable sales were boosted by positive trends across all formats and geographies and the firm was able to report higher ticket sales, which were up 1.8%, as well as increased footfall, which grew by 0.8%.
During the period, Wal-Mart invested heavily in delivering aggressive opening price point to woo cash strapped consumers in its domestic market.
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Duke said that this investment was enabled by Wal-Mart’s sharp focus on managing expenses. Although segment gross margin was down 20bps operating profitability improved in the US as the group was able to lower its SG&A expenses.
“Our intense focus on delivering productivity and reducing cost allows us to invest in lower prices for our customers,” he commented.
Internationally, Wal-Mart was also able to grow its same-store sales across every market in which it operates. This was again achieved through the group’s unrelenting focus on delivering EDLP, management suggested.
“EDLP drives customer loyalty and helps reduce costs. Our full transition to EDLP is under way and this remains central to long-term growth for international,” Duke commented.
Wal-Mart revealed that it is shifting its international focus from driving the top line through store openings to improving same-store sales trends and growing profitability.
“Our goal is to achieve profitability and returns that are more balanced and to do that, we must improve operational and sales productivity in some of our emerging markets,” Duke said.
During the period, Wal-Mart slowed the pace of store openings in three key markets: China, Brazil and Mexico. As a result, the company reduced international sales space growth to 21-23m square metres, down from 30-33m square metres previously. Capital expenditure was down as a consequence, dropping to $4/6-5bn, from $5-5.5bn.
While the slower rate of growth marks a change in Wal-Mart’s international strategy in China and Brazil, a spokesperson for the group told just-food that the slower rate of store openings in Mexico could also be attributed to the allegations of corruption there.
Wal-Mart’s Mexican operations are currently under investigation by regulators in Mexico and the US after accusations that company representatives bribed planning officials in the country to speed planning approval for new store openings.
“Revisions to Walmart de Mexico’s expansion program are partially due to additional steps Walmex is adding to its real estate process that extend the average time required to open a store. These steps include reinforcing documentation that supports real estate projects and enhancing processes with our business partners. In addition, some stores that are scheduled to open in the latter half of December have been moved into January 2013 to allow Walmex’s operations team to focus on the Christmas season,” the spokesperson told just-food.
In an investor note, Janney analyst David Strasser said the slower pace of store expansion is expected to lead to an improved operating performance internationally.
“Although, one quarter does not make a trend – these are steps in the right direction,” he wrote. “The company slowed international square footage … due to slowing growth in China, Brazil, and delays in Mexico/Central America. This slower growth, we believe, will accelerate improvement in these key regions.”