Comps nightmare ending at Walmart

BENTONVILLE, Ark.—Two years of declining same-store sales at Walmart are poised to end next month when the retailer reports third quarter results that reflect positive momentum from a wide range of initiatives put in place during the past 12 months, judging from comments made by senior executives during an all day meeting with analysts on Wednesday.

Executives stopped short of updating the company’s guidance provided at the end of the second quarter, which called for comps to be down 1% to up 1%, but they could hardly contain their optimism in discussing the performance of the U.S. stores division where it was revealed that comps have been positive for the last month of the second quarter and the first two months of the third quarter.

“I’m very excited to talk about the progress we are making in our U.S. business because it is substantial,” Walmart U.S. president and CEO Bill Simon said during Walmart’s 18th annual analysts’ meeting. “We are very optimistic about our sales improvement.”

Simon said the momentum in the company’s business began building in May as the effects of adding back items to the product assortment, improvements in in-stock levels and increased in-store promotional activity helped the company regain lost customer traffic and increased transaction sizes.

Contributing to positive comps in August and September were back-to-school seasonal results that chief merchandising office Duncan Mac Naughton said the company was please with. Looking ahead to the holidays, he suggested Walmart is very well-positioned to maintain sales growth and he disclosed some aggressive marketing plan.

“We are very excited and very well prepared. Our marketing plan for the holidays is quite significant,” Mac Naughton said.

For example, he indicated the company’s television advertising will double its share of voice and suggested to those attending the meeting that if they don’t see a TV spot from Walmart this holiday season they aren’t watching TV. In addition, the company plans seven tab advertisements, 10 free-standing inserts, a toy catalog, a holiday entertaining guide and apparel guide that will be distributed in stores.

“We are really looking forward to the upcoming holiday season,” Mac Naughton said.

Looking ahead to next year, Simon indicated Walmart will continue to accelerate the momentum of existing stores while expanding with new stores. The key driver will continue to be supercenters of which the company has plans for about 130 to 135 new units in addition to between 80 and 100 small format stores, of which the majority with be Neighborhood Market stores with about 20 store being the small Walmart Express concept where results are said to be exceeding expectations.

Walmart plans to spend between $6 billion and $6.5 billion on U.S. expansion next year, out of a total company capital expenditure budget of between $13 billion and $14 billion. The international division receives the second largest chunk of those funds with between $4.5 billion and $5 billion forecast to be spent overseas. Sam’s Club will receive about $1 billion to fund the addition of 10 to 15 clubs and remodeling activity.

Walmart expects its expansion to add between 45 million to 49 million sq. ft. of new selling space which, coupled with domestic and international comp growth, will yield sales growth in the 5% to 7% range and equate to between $22 billion and $31 billion in additional sales.

“Our business is stronger today than it was a year ago and it will be stronger a year from now than it is today,” Wal-Mart Stores president and CEO Mike Duke said at the conclusion of the all day meeting.