Is Walmart Right to Shrug Off Its Tougher Than Expected Quarter?
Walmart did not the post the numbers company execs were hoping for in the first fiscal quarter of the year, but even with same-store sales down 1.4 percent in the U.S. there is a general sense of optimism looking ahead for the rest of the year.
As to what went wrong in Q1, Walmart U.S. president Bill Simon chalked it up primarily to a delay in tax refunds and the weather.
"While we don't generally like talking about weather, it certainly had an impact. Weather sensitive departments like outdoor living, sporting goods, air movement and apparel were challenged, particularly from mid-March to mid-April, when weather was much less favorable than last year," said Mr. Simon on the company's earnings call. "However, there were bright spots. Where weather was fairly normal, in Florida for example, we had positive comps for the quarter."
Out-of-stocks were not mentioned as a negative factor in the chain's performance. Earlier in the year, Bloomberg News cited minutes from a Feb. 1 meeting in which Mr. Simon said stores were "getting worse" at keeping shelves stocked. The company has on several occasions denied that it has widespread issues with out-of-stocks despite anecdotal accounts from customers across the country. During his remarks, Mr. Simon said the retailer had increased the cases handled per work hour by associates by three percent during its first quarter.
Despite a mediocre comp performance, Mr. Simon was upbeat about Walmart's prospects in the months ahead. He cited Nielsen data for share gains in "food, consumables and health and wellness/OTC" for the 13-weeks ending April 27.
He also said the chain's smaller format stores, Neighborhood Market and Walmart Express, were performing well.
Neighborhood Markets, according to Mr. Simon, had a low single-digit improvement as existing stores attracted greater traffic. "Our optimized assortment and convenient shopping experience is resonating with the customer, evidenced by our positive comps across most of the merchandising areas," he said.
Walmart Express locations fared even better with double-digit comps. "In the second quarter, we'll begin testing various supply chain initiatives as part of the North Carolina density test," he said, "which will strengthen our understanding of supply chain strategies for smaller stores."
Another reason for optimism is improvements in logistics and operational changes designed to drive down costs. Mr. Simon said improved supply chain processes enabled Walmart "to transport 3.1 percent additional cases per mile driven, helping us to reduce the overall cost per case shipped versus last year."