Wal-Mart sticking to the plan

by Keith Nunes
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Wal-Mart 's initiatives include improving store layout and focusing on fresh food.

BENTONVILLE, ARK. — On April 1 executives from Wal-Mart Stores, Inc. outlined eight ways they planned to improve the retailer’s performance in the United States. The initiatives included improved store management, inventory management, store layout and a focus on fresh food.

With the issuance of Wal-Mart’s first-quarter earnings May 19, the retailer indicated that so far the plan is a work in progress.

“Our objective is to make changes to improve our short- to mid-term performance while, at the same time, position the company for the long term,” said Doug McMillon, president and chief executive officer. “By position, I’m referring to how we set ourselves up to serve customers for years to come and the strategic choices we are making are in two critical areas: people and technology.”

For the quarter ended April 30, Wal-Mart’s net income fell 6.7% to $3,341 million, equal to $1.03 per share on the common stock, compared with the first quarter of the previous year. Sales for the quarter were flat at $114,002 million, which compared with $114,167 million during the same period of the previous year.

For Wal-Mart’s U.S. business, net sales grew $2.4 billion, or 3.5% compared with the previous year. For the 13-week period May 1, comparable store sales were up 1.1%.

Despite the sales improvement, the U.S. division’s operating income fell 6.8% to $4,639 million. The company said the operating income shortfall was related to “a headwind from shrink, half of which was in food.”

“Comp sales were driven by solid growth in traffic, which was up 1%,” said Greg Foran, president and c.e.o. of Wal-Mart U.S. “Customers continue to see the benefit of lower gas prices versus last year and are responding favorably to some of our new assortments for the spring and summer selling seasons.” He added that he was pleased with the operations improvement the stores in the United States made with regard to fresh foods.

“As we mentioned in April, this is a key area of focus and getting fresh right is critical to the customer experience,” he said. “We are taking the right steps toward reducing the time to bring fresh product to our customers and training associates to ensure the best offering is on the shelf. We still have a lot more to do in this area but we are steadily improving.

“One key headwind we faced in grocery during the first quarter was moderating inflation and meat and deflation in both dairy and produce. While partially offset by inflationary trends in dry and frozen foods, we estimate the moderation in fresh foods impacted our overall comp performance by almost 70 basis points this quarter. Overall, net food inflation negatively impacted our comp by approximately 20 basis points.”

Walmart's mobile traffic was up over 100% for the quarter.

Mr. Foran added that Wal-Mart is in the process of launching the final phase of its on-line checkout efforts.

“E-commerce plays a key role in our focus on access for the customer, which is fundamentally around convenience,” he said. “Our customers are using their mobile devices to access our site on the go. Mobile traffic was up over 100% for the quarter and we saw higher conversion rates as well.

“We continue to learn from our grocery home shopping tests where we recently added another location to the Huntsville, Ala., market. And we are working toward a better customer experience in our Wal-Mart Pickup program, formally called Site to Store. The program includes improved email communication and new signage package that makes it easier for customers to understand the program and a focus on a faster pickup experience in the stores. It will roll out to all stores by Oct. 1.”
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