Wal-Mart Changing The View With Best Identicals In Almost Four Years
Wal-Mart is back. After struggling with a myriad of issues ranging from associate relations to in-stock conditions which resulted in a nearly four year sales slump, the world’s largest retailer (2.3 million associates worldwide) posted its best comparable store results at its U.S. stores in more than four years.
When chief executive Doug McMillon, who has spent his entire career at the Bentonville, AR merchant, took the helm three years ago, he promised he would make the only company he’s ever worked for more progressive and flexible. That meant restructuring the executive team, creating better morale at store level and investing heavily in e-commerce, where Wal-Mart was getting pummeled by online giant Amazon.
It’s taken the 50-year old CEO nearly 36 months to make those radical and sometimes painful changes, but financial results over the past year have indicated that Wal-Mart has measurably regained the spring in its step, which will make them even tougher to defend against in an already overcrowded marketplace.
In its fourth quarter ended January 31 (which included the busy holiday shopping period), Wal-Mart’s comp store revenue increased 1.8 percent in the U.S. (vs. 0.6 percent in last year’s fourth quarter) and its domestic e-commerce volume jumped 29 percent, aided by its $3.2 billion acquisition of jet.com in September. Mark Lore, co-founder of jet.com, is now spearheading Wal-Mart’s e-commerce business.
Other strong U.S benchmarks included a 2.8 percent sales gain in overall Wal-Mart bannered stores (to $83.7 billion), 1.4 percent traffic increase and a 0.4 bump in average transaction.
At its other U.S. banners – Sam’s Club and Neighborhood Market – the news was equally as good.
The company said that its grocery, health and wellness, and apparel were some of the top-performing categories at its U.S. stores, despite a slow beginning to the quarter for cold-weather merchandise. Electronics, media and gaming were soft.
At its long beleaguered club store operations, comps (ex-fuel) increased 2.4 percent and overall sales jumped 3 percent. Additionally, in-store traffic and average transaction size both grew 1.2 percent.
And at Neighborhood Markets, the fastest growing Wal-Mart banner, comps surged 5.3 percent in the 13-week period.
On a global basis, the Bentonville Behemoth rang up fourth quarter sales of $130.9 billion (a 3 percent increase, excluding currency variables). Total sales for its fiscal year were $496.9 billion (a 3.1 percent gain, excluding currency variables).
If there was one somber note to Wal-Mart’s Q4 financial performance it was that earnings were slightly down. In its core U.S. stores, profit dipped by 2.5 percent to $4.99 billion and on a worldwide analysis, earnings dipped 3.4 percent. However, many analysts felt the decline could be attributed to much higher than usual cap-ex spending to improve infrastructure and bolster its e-commerce initiatives.
Wal-Mart also noted that it generated $11.9 billion in operating cash flow and returned $3.6 billion to shareholders through dividends and share repurchases.
“We’re moving with speed to become more of a digital enterprise and better serve customers. We had a very solid fourth quarter with U.S. comp sales growth of 1.8 percent and U.S. e-commerce GMV growth of 36 percent. Our international business is consistently delivering solid sales growth in constant currency, and Sam’s Club posted its best comp sales growth of the year. I want to thank our talented associates for their work. We have more work to do, but I’m pleased with our progress,” said McMillon.