BENTONVILLE, Ark. — Food sales at Wal-Mart Stores are rebounding along with selection on the once-pared shelves of the mass merchant, officials said in an earnings conference call last week.
While comparable-store sales at Wal-Mart's U.S. stores fell for a sixth straight quarter, its food comps were a “solid positive,” said Bill Simon, Wal-Mart's U.S. president and chief executive officer. Simon noted the food sales improvement came along with restoring product assortments cut as part of the ill-fated “Project Impact” initiative of 2009, as well as returning pallets of goods to “Action Alleys” that were also previously cleared from stores.
“We've added the most SKUs back in food, and customers are responding,” Simon said. “We're pleased with the progress we're making with categories as varied as marshmallows, pie fillings, jams and jellies. For example, eight weeks after modulars with additional SKUs were completed, we saw on average a 39 basis-point increase in sales in these categories.”
Fresh foods, snacks, beverages, bakery and Halloween candy performed well during the third quarter, which ended Oct. 29, Simon said. A recent focus on apples — offering a variety at leading prices throughout the fall season — “was very successful driving excitement and incremental sales,” Simon added.
However, he said the rebound was constrained by the continuing economic pressure felt by Wal-Mart shoppers. Comparable-store sales in the U.S. declined by 1.3%.
The comp decline — which was within the company's expected range — resulted as shoppers continued to battle difficult economic conditions, with the “paycheck cycle” of heavy sales and traffic immediately following paycheck and assistance payment checks still prominent especially in grocery, Simon said.
Store traffic and average ring were both down, as categories including health and wellness, consumables, general merchandise and apparel all achieved negative comps, Simon said.
“Our own surveys and the reports on the recent U.S. election cycle indicate that financial uncertainty still weighs heavily on everyday Americans, including many of core customers,” Mike Duke, Wal-Mart's chief executive officer, said. “The paycheck cycle is still very pronounced with these customers.”
Officials, however, emphasized that comps improved sequentially from a 1.8% decline in the second quarter, and that profits exceeded estimates on fewer markdowns, better expense control and a tax benefit. Moreover, officials were confident the company was prepared for the holiday season. “We're in a position of strength for the busiest, most critical season of the year, and we're expecting a positive comp in the fourth quarter,” Simon said.
A 9.3% sales increase from international operations helped Wal-Mart post an overall 3.1% sales gain to $101.2 billion in the quarter. Net income of $3.4 billion improved by 9% as a result of better expense leverage and a tax benefit of $119 million. The company adjusted its annual earnings guidance upward to reflect the tax benefit.
In Canada, Wal-Mart comparable-store sales declined by 0.4% although market share of food and consumables increased as the company operated 40 more Supercenters than it did a year ago, said Doug McMillon, CEO of Wal-Mart International.