Walmart suffers 2Q negative comps in discretionary categories

Plans to restore products to the mix, add new items

Cecile Corral -- Home Textiles Today, 8/17/2010 3:22:44 PM

Bentonville, Ark. - After heavily editing assortments and enacting steep price rollbacks, Walmart US plans to restore thousands of products to the mix and add new items.

Comps for the second quarter ended July 31 were negative in almost every key discretionary category - apparel, home, health and wellness, hardlines and entertainment, the company said in reporting its quarterly results today.

In home, the best performers were floor care, appliances and bedding, "categories for many student dorm rooms," noted Bill Simon, who was appointed president and ceo of Walmart U.S.

"Consistent with the most recent quarters, customers continue to spend cautiously, especially on discretionary products, and the paycheck cycle remains pronounced," he added. "Government assistance continues to increase as a form of payment, particularly in regions with higher unemployment and credit now only represents about 15% of our tender."

Sales at Walmart U.S. were flat at $64.65 billion, and comps were down 1.8%. Operating income was slightly off - down 0.2% to $4.9 billion.

"During the past six weeks, we've returned merchandise to Action Alley. Our store managers now have more autonomy to make decisions on what's right for their customers. We believe it will take some time to see significant changes in comp sales, but we are beginning to see more encouraging traffic trends," said Simon.

Sam's Club, in contrast, saw an uptick in discretionary category sales, with domestics posting positive comps along with mattresses, jewelry and housewares.

"We have been strategically aggressive in key events like "back-to-school" and "back-to-college" and we anticipate a solid season," said Brian Cornell, president and ceo of Sam's Club.

At Sam's Club, quarterly net sales rose by 2.2% to $12.46 billion from last year's $12.19 billion and comps were up 1.0% without the impact of fuel. Operating income grew by 2.4% to $428 million from $418 million for the quarter.

Walmart Inc. reported for its second quarter a consolidated operating income increase of 4.4% to more than $6 billion and diluted earnings per share of $0.97, a benefit of approximately $0.01 from currency exchange rates. These results were above First Call consensus of $0.9 and within the company's guidance of $0.93 to $0.98. This compared to diluted EPS of $0.89 in the second quarter last year as adjusted from the previously reported $0.88.

Walmart Inc.'s net sales for the period were $103 billion, an increase of 2.8% from $100 billion in the year-ago period. Net sales for the second quarter included a currency exchange rate benefit of $857 million. On a constant currency basis, consolidated net sales increased 2.0 percent. Income from continuing operations attributable to Walmart for the quarter increased to $3.6 billion from $3.5 billion in the second quarter last year.

"The slow economic recovery will continue to affect our customers, and we expect they will remain cautious about spending," said Mike Duke, Wal-Mart Stores Inc. president and ceo. "The top priority for the business remains improving top line sales and customer traffic."