BENTONVILLE, Ark. -- Wal-Mart Stores here said last week food sales are growing at more than double the rate of overall sales.
The company said overall sales jumped 15.5% to a record $52.7 billion for the third quarter ended Oct. 31 and rose 14% to $153.6 billion for the nine-month period, while food sales at supercenters grew by 34% for the quarter and 35% for the year to date, according to Tom Schoewe, chief financial officer.
Net income climbed 8.2% to a record $1.5 billion for the 13-week quarter and 4.5% to $4.5 billion for the year to date.
Wal-Mart did not break out supercenter sales from the company's total volume. However, a Wal-Mart executive said earlier this month that supercenter sales in fiscal 2000 accounted for 49% of Division 1 sales, or $60.662 billion -- just under half the combined volume for Wal-Mart discount stores, supercenters and Neighborhood Markets.
Wal-Mart operates1,060 supercenters -- representing 196 million square feet, the company noted -- with plans to open 100 to 185 more next year, Schoewe said in a prerecorded phone call following release of the company's financial results.
He also said the company intends to maintain an aggressive growth program, boosting overall square footage by 46 million square feet for a 9% increase, despite the flagging economy, "[because] strategically we've decided our capital expenditures program will not be penalized by short-term economic correction," he explained.
Commenting on the company's financial results, Lee Scott, president and chief executive officer, said the 8.2% increase in earnings for the quarter did not meet the company's goal of growing earnings at a rate equal to or better than sales, "although this increase represents a more than doubling of the earnings growth rate experienced in the first six months of the year."
The growth was in line with the company's expectations, he said, "[which] is particularly encouraging given the slowing economy and the uncertainty of the last several months."
Comparable-store sales for the quarter rose 6.7%, with the Division 1 stores up 6.7% and Sam's Clubs up 6.3%; for the nine-month period, comps increased 5.4%, with the Wal-Mart Stores segment up 5.3% and Sam's up 5.7%.
Schoewe said food comps "continue to be very strong." However, he said a drop of 33 basis points in Wal-Mart's overall gross margin was due in part to the growth of food sales, "which pulls down the gross margin percentage, although the high turns in food cause operating margin dollars per square foot to remain comparable."
Other factors affecting gross margins, Schoewe said, were increased markdowns as Wal-Mart seeks to reinforce its value statement to drive market share and a consumer preference for lower opening price points.
Scott told analysts business has come back since Sept. 11, "as customers continue to spend cautiously and to show a preference for value."
He also said Wal-Mart has seen more midweek shopping. "Historically, customer counts are stronger during the weekends than midweek, and while that is still true, our weekday counts have picked up and it's not at the expense of our weekend traffic," he explained.
"As the economy has dropped, customers are more concerned about price so they're stopping in during the week, and when the economy improves, we expect to keep those customers."
In other Wal-Mart news:
The company plans to expand its China operations into Beijing "in the next several years," a company spokesman told SN, with plans for at least four supercenters and two Sam's Clubs. He declined to pinpoint the timing of the openings but said the company has signed a rental contract to open its first Sam's in Shijingshan, a western suburb of Beijing.
Wal-Mart will relocate its global purchasing center from Hong Kong to Shenzhen, China, in February, the spokesman said. The purchasing center was formerly operated by a third party, Pacific Resource Export, that Wal-Mart acquired earlier this year.
Wal-Mart said it will open its first two new stores in Germany since moving into the country through acquisitions in 1998. Both stores are scheduled to open this month -- reportedly both supercenters, said to be located in Hanover and Leipzig. The spokesman said he was unable to confirm the locations.
He also declined to comment on reports Wal-Mart will enter Japan by taking over 30 units of Mycal Corp., a Japanese company that ceased operations in September after filing for protection from creditors
In the United Kingdom, Wal-Mart's Asda operation reportedly plans to roll out a new format to 20 locations after testing it at one location for the past six months. The store is said to be 30% smaller than other Asda locations but with a similar product assortment. The spokesman declined comment.
