Wal-Mart thinking outside the big box

by Monica Watrous
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BENTONVILLE, ARK. — Smaller stores and on-line sales hold promise for Wal-Mart Stores, Inc. The company said it will invest aggressively behind both platforms as it continues to adjust to a changing retail environment.

During a Feb. 20 earnings call, Wal-Mart announced plans to accelerate growth of its smaller format stores, including Neighborhood Market and Wal-Mart Express, by adding 270 to 300 units in the coming year.

“These stores continue to deliver positive comp sales and traffic increases each quarter,” said Bill Simon, president and chief executive officer, Wal-Mart U.S. “In fact, comp sales, without fuel, for Neighborhood Markets grew approximately 5% for the 14-week period.”

In fiscal 2014, Wal-Mart added 105 new Neighborhood Markets and 7 Wal-Mart Express units.

“Our customers’ needs and expectations are changing,” Mr. Simon said. “I believe these stores will enable us to exceed their expectations by providing convenience and easy access to fresh foods, pharmacy and fuel.”

Wal-Mart also expanded its grocery delivery test with positive results.

“Almost 90% of the customers rate the service above average or outstanding,” Mr. Simon said.

Global e-commerce sales rose 30% over the previous year, surpassing the $10 billion mark, the company said. However, soft sales and investments in pricing and e-commerce hurt overall profit for Wal-Mart during the fourth quarter and fiscal year.

For the year ended Jan. 31, net income attributable to Wal-Mart declined 6% to $15,918 million, equal to $4.90 per share on the common stock, compared with $16,963 million, or $5.04 per share, in the previous year.

Fourth-quarter income attributable to the company fell 22% to $4,354 million, or $1.37 per share, from $5,597 million, or $1.68 per share, during the fourth quarter of fiscal 2013.

Total revenues for the year increased 1.6% to $476,294 million from $468,651 million in fiscal 2013. For the quarter, total revenues rose 1.5% $129,706 million from $127,776 million during the prior-year period.

Operating income for Wal-Mart U.S. advanced 4% for the year and 0.1% in the quarter, while net sales for the segment climbed 1.8% during the year and 2.4% in the quarter.

Comparable traffic for Wal-Mart U.S. dipped 1.7% during the quarter, reflecting severe winter weather impacts, but average ticket increased 1.3%, buoyed by e-commerce business.

Wal-Mart’s U.S. grocery division gained market share during the quarter, but comparable sales declined, due to a reduction in government food benefits. Enhanced quality and price investments benefited the produce and adult beverage sections, each delivering mid-single-digit comparable sales growth. Meat, deli and bakery also produced positive comparable sales for the quarter, and home beverage systems Keurig and SodaStream drove traffic and sales growth, the company said.

For fiscal 2015, Wal-Mart is focused on leveraging its strengths in produce while driving improvement in weaker areas, such as snacks and beverages.

“We recognize the need to win at the convergence of digital and physical, and we’ll leverage our more than 4,200 stores as access points for our digital business to further spur growth through e-commerce,” Mr. Simon said. “And, of course, we’ll do this in the Wal-Mart way — leveraging expenses and remaining true to our everyday low price promise.”
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