Walmart: Market share gains here to stay

Customers now “proud” to shop at Walmart

By Cecile B. Corral -- Home Textiles Today, 5/13/2009 2:35:00 PM

Bentonville, Ark. -- Wal-Mart Stores Inc.’s president and ceo, Mike Duke, tried to dispel suspicions that the discount department store chain’s recent performance "is just a result of the economic downturn and if it will last," he said during the first quarter earnings call this morning.

“This is not a short-term phenomenon,” Duke stressed. “Customers will always be interested in saving money. We have enduring brand strength because the trust we’ve earned from our customer has never been stronger, and as a result we believe we’ll continue to gain market share. We are optimistic about the long term and realistic about short term.” Earnings were essentially flat -- 76 cents per share for the quarter ended April 30 vs. 76 cents in last year’s first quarter. Currency exchange rates negatively impacted earnings by approximately $0.04 per share, the company said.

Total sales were also flat -- down 0.6% to $93.471 billion. Without the impact of exchange rates 4.5% to about $98.307 billion.

Sales at Walmart U.S. rose 3.8% to $61.2 billion. Sam’s Club sales declined 1.4% to about $11 billion. International sales fell 11.1% to $21.3 billion.

Duke said customers have “changed their behavior and their mindset” and are now “proud to tell people that they shop at Wal-Mart.” He attributes this new attitude among newcomer and existing shoppers to “the improvements we’ve made in marketing, merchandising operations in the U.S. and around the world are sustainable.” Eduardo Castro-Wright, vice chairman concurred. As he did earlier this month during a retail conference, Castro-Wright noted that Wal-Mart has benefitted from new customer traffic, comprised of shoppers who spend about 40% more than existing customers.

Strong quarterly sales results were driven by three key factors, Castro-Wright said: improved quantity and quality of traffic and shoppers’ buying habits; Wal-Mart’s focus on “winning on key seasonal events,” as it did in Easter when holiday-related merchandise drove part of the chain’s comp store sales increases; and recent merchandising system enhancements “that are paying off” and proving “sustainable.” Wal-Mart’s recent efforts to enhance its product mix in areas like soft home positively impacted gross margin, which experienced a 52 basis point improvement for the quarter.

“This was driven largely by a higher-margin product mix, the result of our improved sales performance in more discretionary categories,” he said.

Castro-Wright also boasted about Wal-Mart’s online business, which is “continuing to grow” and recently showed faster growth compared to the retailer’s closest competitor, “based on their latest quarterly release,” he said, without offering the competitor’s name.

The company’s Sam’s Club warehouse club division also made news. “We continue to see members spending on fresh food and consumable categories,” said Brian Cornell, who last month started his new role as president and ceo, Sam’s Club.

Cornell also announced that on Monday, Linda Hefner assumes her new post as the warehouse club’s executive vp of merchandising and replenishment.

She is being promoted from her former post as evp and general manager of Walmart U.S. stores’ home business.