Wal-Mart Reaps Another Record Quarter

By Cecile B. Corral -- Home Textiles Today, 8/18/2008 12:00:00 AM

Bentonville, Ark. —

Wal-Mart's recent investments on better quality but affordable goods and a revised layout and presentation in its U.S. stores' home department are "paying off," the discount chain's executives said during its second quarter earnings call last week.

"Even in this challenging economy, we are pleased to see our investments in home are paying off with improved performance," said Eduardo Castro-Wright, evp, president and ceo, Wal-Mart Stores division. "We have revised the layout of all departments and adjacencies for ease of shopping. We have improved merchandise quality and assortment and have sharpened prices."

And, he added, Wal-Mart's Back-To-College campaign is "driving sales in core categories within home," including bedding as well as furniture, small appliances and house wares.

On the flip side, housewares was among the weaker performing categories at Sam's Club during the second quarter, said Douglas McMillon, evp, president and ceo, of the company's warehouse club division.

On a broader scope at Wal-Mart Stores, Castro-Wright said he is "very pleased with the Wal-Mart US team's performance" during the quarter, when the division's total net sales were $64 billion, an increase of 8.5% from the prior year. In addition, Wal-Mart Stores beat its own record, delivering "an even better comp performance" of 4.6% than it had the quarter before, when it churned its then-best comp store sales results in eight quarters with 2.7%.

"To date our US stores have comparable-store sales of 3.7%. This compares to a 0.6% comp figure at this time last year," he continued.

For the quarter ended July 31, net income shot up 17% to $3.45 billion, or 87 cents per share, beating Wall Street's expectations by 2 cents.

While the federal government's stimulus checks contributed somewhat to Wal-Mart Stores' healthy quarterly results, Castro-Wright said "our business and price leadership position, operational improvements and stronger merchandise quality and presentation were also important factors in our results. We're seeing our investment in our three-year strategic plan pay off."

Both traffic and ticket rates increased – the former in urban markets, the latter in rural regions.

To offset cost increases in meat, produce, dairy and bakery goods, Wal-Mart Stores "substantially increased" roll-backs to mitigate inflation in these consumable categories.

Inflation within general merchandise was "less pronounced" during the second quarter, and deflation persisted in electronics. Wal-Mart Stores' entertainment business "continued to exceed plan," as the retailer experienced strong sales in computers, flat panels TVs, video games and digital audio.

And its health and wellness segment proved high single digit comp store sales growth.

Corporate parent Wal-Mart Stores Inc. had much to boast about, as well, as the second quarter delivered a milestone. The period's $101.6 billion in net sales — an increase of 10.4% from the prior year — marked the second time the company hit a hundred billion dollars in a quarter, noted Lee Scott, president and ceo.

"Each operating segment contributed." he added.