Wal-Mart Stores, Inc., today reported its sixth consecutive quarterly U.S. sales decline as high unemployment pressured its customers, though the world’s largest retailer singled out fresh produce and dairy products as bright spots.
Overall, comparable-store food sales were “a solid positive” during the quarter, said Bill Simon, chief executive of the company’s U.S. operations,
Bentonville, Ark.-based Wal-Mart ramped up fresh food efforts in recent years, using aggressive discounts to lure customers and grab market share from large, traditional supermarket chains. Wal-Mart accounts for about a fifth of the U.S. retail food market, according to analysts, and sold about $132 billion in groceries last year.
Last month, Wal-Mart said it planned to double its sales of locally grown fresh fruits and vegetables in the U.S. over the next five years as part of a broader effort to support sustainable agriculture worldwide.
Growth in food hasn’t been enough to offset a sluggish economy that’s pinched Wal-Mart’s core customers. Wal-Mart today said comparable U.S. store sales fell 1.3 percent, excluding gasoline, during the 13 weeks ended Oct. 29 compared with the same period a year earlier. The sales figure excludes Wal-Mart’s Sam’s Club stores.
Wal-Mart expects comparable sales for the current quarter to range from a 1 percent decline to a 2 percent increase, the company said today. Comparable sales, a widely followed measure of retailer performance, typically reflect stores open at least one year.
High U.S. unemployment has created “headwind in operating expenses, with many states increasing unemployment insurance taxes per associate,” Simon said. Unemployment insurance taxes were up 25 percent for the quarter, compared with last year, he said.
“These types of changes are largely uncontrollable, but can be expected to impact our business from time to time,” Simon said.
At Sam’s Club, comparable sales rose 2.4 percent during the quarter, mirroring strength at other club store chains, such as Costco Wholesale Corp. Food and beverages generated “strong” sales, said Brian Cornell, chief executive of Sam’s Club. “We did experience inflation in dairy and meat.”
Wal-Mart still had a 9.2 percent increase in profit for the quarter, fueled by sales growth in its international operations and in Sam’s Club warehouse stores. Net income rose to $3.44 billion, or 95 cents a share, from $3.15 billion, or 82 cents, a year earlier, Wal-Mart said. Net sales rose 2.5 percent to $101.2 billion.
Analysts say Wal-Mart stands a good chance of halting declining U.S. sales in coming months, partly on a boost from holiday shopping.
Wal-Mart’s quarterly results “had a familiar feel, as tepid U.S. results were partly offset by continued strength in higher-growth international markets,” Morningstar, Inc., analyst R.J. Hottovy said in a report today.
“However, we remain confident that efforts to restock a wider variety of brands and store configurations emphasizing new products in a number of traffic-driving categories will gain traction over the next few quarters” in the U.S., Hottovy aid. That should result in “a reversal of negative same-store sales trends.”
Also today, Wal-Mart said it expects fiscal 2011 profit of $4.08 to $4.12 a share, up from a previous estimate of $3.95 to $4.05.
Third-quarter per-share profit of 92 cents topped analyst expectations by about 2 cents, according to Thomson Reuters I/B/E/S. In early afternoon trading, Wal-Mart shares rose 61 cents, or 1.1 percent, to $54.56, on Aug. 17. The stock is up 2.2 percent this year.