Wal-Mart sales continue to sag; retailer raising some food prices

 Resize text         Printer-friendly version of this article Printer-friendly version of this article

Wal-Mart Stores Inc. reported U.S. sales fell for the eighth consecutive quarter as expensive gasoline pressured consumers, and the largest retailer said it is raising prices for some foods to offset inflation in meat, milk and other products.

Surging gasoline prices and high unemployment pushed consumers toward discounted items and cheaper private label products, according to Wal-Mart’s quarterly results released May 17. Many Wal-Mart customers are consolidating shopping trips to save money on fuel, the company said.

“We saw continued pressure from ongoing macro economic conditions, as customers continued to trade down,” Bill Simon, chief executive of the retailer’s U.S. operations, said during a pre-recorded conference call released May 17 along with financial results.

“Rising gas prices, high unemployment and increasing inflation continue to be the most important issues facing our customers today,” Simon said, according to a transcript of the call.

Wal-Mart is putting renewed emphasis on its long-running “Every Day Low Prices” promotions to win back customers. But, like other food retailers, Wal-Mart is also passing along higher costs for beef, pork and other commodities to its shelves.

During the previous quarter, Wal-Mart’s grocery inflation was about 1 percent, “with the greatest impact on perishables,” Simon said.

Rising retail prices are stirring concern that beef and pork demand will suffer as consumers shift to cheaper meats, such as chicken. Retail meat prices rose an average of 9.5 percent a month this year through April, compared with the same month in 2010, according to Bureau of Labor Statistics data. That compares to a 2.8-percent increase for all 2010.

As the largest U.S. food retailer, Wal-Mart is a major buyer of beef, pork, milk and other fresh foods. In the 12 months ended January 31, groceries accounted for 54 percent of Wal-Mart’s U.S. sales, or nearly $141 billion, according to a recent company filing.

Wal-Mart’s U.S. sales sagged over the past two years as the economy recovered slowly from the 2008-09 recession and consumers increasingly sought bargains at dollar stores and other discounters. More recently, pump gasoline near or above $4 a gallon has squeezed Wal-Mart’s customers.

Comparable U.S. store sales excluding gasoline fell 1.1 percent during the 13 weeks ended April 29 compared with the same period a year earlier, Bentonville, Ark.-based Wal-Mart said May 17. The sales figure excludes Sam’s Club, Wal-Mart’s warehouse store chain.

As in previous quarters, Wal-Mart singled out its grocery business as a bright spot. Groceries posted a “low single-digit” comparable-store sales increase, in percentage terms, during the quarter, Simon said.

“Our food business is delivering positive sales growth that’s on par with the top competitors,” Simon said during the call.

Sam’s Club continued to fare better than Wal-Mart’s namesake U.S. stores. Comparable store sales rose 4.2 percent excluding fuel during the quarter amid strength in fresh food and apparel, said Brian Cornell, chief executive of Sam’s Club.

“We continue to see inflation in key categories such as produce, meat and dairy,” Cornell said during the conference call. “However, we managed through inflation, with little impact on our margin and have seen continued growth in units sold year-over-year.”

Wal-Mart’s sales slump may end during the current quarter, Simon indicated, though the company remains cautious on the economy. Wal-Mart said it expects comparable store sales for the quarter that ends in July to range between a decline of 1 percent and a rise of 1 percent.

A widely-followed gauge of retailer performance, comparable store sales typically reflect locations open at least a year.

“We’re monitoring the economic environment carefully, as significant changes in gas prices and inflation during the quarter will influence our actual performance,” Simon said.

Gasoline prices soared this year as turmoil in Libya and other top petroleum countries of North Africa and the Middle East sent crude oil above $110 a barrel. Earlier this week, regular-grade gasoline averaged $3.94 a gallon nationwide, up 37 percent from $2.87 a year ago, according to AAA, the auto trade association.

Wal-Mart’s quarterly results still topped analyst expectations, with the retailer’s net income rising 3.9 percent amid stronger international sales.

During the three months ended April 29, Wal-Mart’s fiscal 2012 first quarter, net income rose to $3.43 billion from $3.3 billion a year earlier. Per-share earnings of 97 cents surpassed the average analyst estimate by about 2 cents, according to Yahoo! Finance.

Wal-Mart’s total revenue rose 4.3 percent to $103.4 billion.


Prev 1 2 Next All



Comments (0) Leave a comment 

Name
e-Mail (required)
Location

Comment:

characters left


644K Hybrid Wheel Loader

The 229 hp 644K Hybrid Wheel Loader from John Deere utilizes two sources of energy: diesel and electric. The machine’s ... Read More

View all Products in this segment

View All Buyers Guides

)
Feedback Form
Leads to Insight