Size of comps increase all that’s in doubt

Walmart didn’t release a third-quarter same-store sales figure when it held a meeting with financial analysts on Wednesday, but it might as well have. Everything else the company’s senior executives said about the performance of the U.S. stores division indicated the nightmare that has been nine consecutive quarter of negative comps will end on Nov. 15 when quarterly results are reported.

Walmart U.S. president and CEO Bill Simon said that comps in July, the last month of the second quarter, were positive and that trend had continued during the first two months of the third quarter. Guidance provided at the end of the second quarter envisioned the possibility of a comp increase with a decline of 1% to an increase of 1% was provided as the range of possibilities.

“I’m very excited to talk about the progress we are making in our U.S. business because it is substantial,” Simon said after being introduced by Wal-Mart president and CEO Mike Duke who noted he didn’t want to steal Simon’s thunder. “We are very optimistic about our sales improvement,” Simon said.

Simon indicated that 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 trust with customers, recover lost traffic and increase transaction sizes.

Walmart has added roughly 10,000 items to its product assortment, many of which are in what chief merchandising office Duncan Mac Naughton described as heritage categories, such as sporting goods and automotive. For example, comps in hunting increased 16%, tires were up 7% and fishing increased 9% as items were added to an assortment that ranges from opening price point to aspirational.

The process of adding back items that were eliminated as part of the company’s wide ranging Project Impact effort a few years ago is about 75% complete, according to Mac Naughton. The key remaining areas are apparel, electronics and home. In home, plans call for a rationalization of private brands and an emphasis on items that drive volume. In apparel the plans is to simplify the offering by growing national brands, focus on basics and improve the store experience. The basics emphasis is already paying off with comps in September up 6% in underwear, 8% in socks and 5% in jeans.

“We’ve struggled for years in apparel, but comp trends are improving and gaining momentum although they are still negative,” Mac Naughton said.

The add-back strategy first began in food and Mac Naughton said that business continues to gain momentum.

All the commentary around comps by month and category was especially noteworthy because Walmart stopped reporting monthly sales several years ago, about the time comps turned negative. The disclosure that the company had produced three consecutive months of positive numbers caused shares of the company to surge in early trading on Wednesday and understandably had analysts buzzing at the meeting. So much so that VP investor relations sought to clarify the company’s statements later in the day and then a press release regarding capital expansion plans released at the end of the meeting also made note of the monthly performance.