AddThis

Walmart Q1 comps gain 2.6%

BENTONVILLE, Ark. -- First quarter profits at Walmart exceeded analysts’ estimates as same-store sales increased 2.6% and the company said it strategy of low prices on a broad merchandise assortment is resonating again with shoppers.

Sales for the quarter increased 8.6% to $112.3 billion, compared with $103.4 billion in the first quarter last year. The results would have been even stronger except for an approximately $800 million headwind related to a negative currency exchange rate. Earnings per share of $1.09 were a nickel ahead of analysts’ estimates and three cents higher than the top end of the company’s guidance of $1.01 to $1.06.

“Our overall performance reflects the success of Walmart’s business model: driving the productivity loop, leveraging expenses and investing in price leadership,” said Wal-Mart Stores president and CEO Mike Duke. “We believe that the momentum throughout our business positions us very well for the rest of the year.”

Strength was evident across all three of the company’s business segments, but it was the performance of the U.S. group that stood out thanks to a 2.6% same store sales increase that exceed the company’s flat to 2% guidance range and marked the third consecutive quarter of U.S. comp improvement. Total U.S. sales increased 5.9% to $66.3 billion.

“In a highly competitive retail environment, Walmart U.S. is increasing price separation across categories and driving increased traffic to both the grocery and general merchandise areas of our stores,” Duke said.

Walmart US president and CEO took things a step further with comments about the effectiveness of a clear U.S. strategy.

“Our merchants are focused on increasing sales through the right assortment at the right time and for the lowest price,” Simon said. “We will continue to invest in price to lower costs for our customers by enhancing leverage initiatives and managing expenses.”

The U.S. sales improvement resulted from larger transaction sizes and increased traffic to stores and also benefitted somewhat from an easy prior year comparison when comps declined 1.1%. A similar comparison situation exists in the second quarter with last year’s comp down .9%, but Simon this year’s second quarter comps are expected to increase between 1% and 3%.

Sam’s got in on the act as well and saw its sales increase 7.9% to $13.8 billion. A same store sales increase of 5.3%, excluding fuel, was significant considering Sam’s was up against a 4.2% prior year comparison.

“Sam’s Club is off to a great start this year, with continued strength in traffic and ticket. Membership engagement scores are at record highs, membership income is growing, and renewals and upgrades are strong,” Duke said.

Sam’s expect second quarter comps to increase in the range of 4% to 6% on top of last year’s 5% increase.

Sales grew the fastest at Walmart international where roughly $1.9 billion in acquisition-related volume was offset by a negative $800 million currency exchange rate. On a constant currency basis, international sales increased 10.9% to $31 billion.

“Walmart International delivered strong sales growth in the first quarter and operating income grew faster than sales, increasing more than 20%,” said Duke. “We are very focused on improving profitability and returns, and with greater transitions to everyday low price in more markets, we have stronger customer traffic, which contributed to net sales growth.”

© 2014 Retailing Today. All Rights Reserved.