Wal-Mart Stores, Inc., reported its fifth consecutive quarterly U.S. sales decline, saying recent price discounts failed to produce the boost the retailer expected amid a struggling economy.
High unemployment continued to burden consumers, leading to stepped-up use of food stamps and other government assistance, Wal-Mart executives said today following release of the world’s biggest retailer’s quarterly results.
“Customers continue to spend cautiously, especially on discretionary products,” Bill Simon, chief executive of Wal-Mart’s U.S. operations, said in the company’s earnings call. “Government assistance continues to increase as a form of payment, particularly in regions with higher unemployment.”
Additionally, the aggressive “rollbacks,” or permanent price reductions, that Wal-Mart launched earlier this year for most items “did not generate the overall sales lift we expected,” Simon said, according to a transcript of the call posted on Wal-Mart’s Website.
Wal-Mart today said comparable store sales, a widely followed measure of retailer performance, fell 1.8% at U.S. stores excluding gasoline during the 13 weeks ended July 30, compared with the same period a year earlier. The sales figure excludes Wal-Mart’s Sam’s Club stores.
“The slow economic recovery will continue to affect our customers, and we expect they will remain cautious about spending,” Wal-Mart chief executive Mike Duke said in a statement. “Wal-Mart is committed to our mission of saving people money so they can live better.”
Groceries, particularly fresh foods, were a bright spot for Wal-Mart amid rising meat and milk prices, Simon said. Fresh dairy and meat products had “modest” inflation during the quarter, though that was offset by deflation in other areas, he said.
“Fresh continues to drive growth,” Simon said. “In a mostly deflationary food environment, our grocery sales generated slightly positive (comparable) sales.”
“Events like Summer Fruit Fair presented the department with greater authority and helped drive double-digit (comparable) growth for many items in produce, including strawberries,” Simon said.
Additionally, comparable-store sales for Sam’s Club rose 1% during the quarter, Wal-Mart said.
Bentonville, Ark.-based Wal-Mart is the largest U.S. food retailer, with about one-fifth of the market, according to analyst estimates. In Wal-Mart’s fiscal 2010, the company had nearly $132 billion in revenue from groceries, excluding Sam’s Club stores.
While Wal-Mart’s U.S. sales continued to erode, the company said overall quarterly profit rose 3.6%, boosted by cost reductions and international growth. Wal-Mart also hiked its earnings forecast for fiscal 2011.
Net income for the 13 weeks ended July 30, Wal-Mart’s fiscal 2011 second quarter, rose to $3.6 billion from $3.47 billion a year earlier, the company said today. Company-wide net sales rose 2.8% to $103 billion. International sales rose 11%, to $25.9 billion.
Wal-Mart’s per-share profit of 97 cents for the quarter topped analyst expectations by about 1 cent, according to Thomson Reuters I/B/E/S.
For fiscal 2011, Wal-Mart predicts net income of $3.95 to $4.05 a share, up from a previous forecast of $3.90 to $4 a share.
In early afternoon trading, Wal-Mart shares rose 96 cents, or 1.9%, to $51.37. The stock is up 3.9% this year.