Traffic and sales are “pleasing” so far

It seems like forever ago that Walmart stopped reporting monthly sales and providing regular guidance updates, which is why one comment by Walmart CFO Charles Holley stood out above all the others he made this week at the Bank of America Merrill Lynch Consumer & Retail Conference.

After recapping the accomplishments of the U.S. stores division and how that performance translated into financial results, Holley told the audience of investors how they should interpret his remarks and came as close as possible to providing a same-store sales guidance update without sharing an actual number.

“I think your take-away should be for the Walmart U.S. segment that our assortment is back, our price leadership is back, we are operating more efficiently, our comps are positive, and we feel like we are winning our customer traffic,” Holley said. “We believe we can be much better. Now it's still very early in the quarter, I am not going to give you any numbers, and we still have a lot of work to do, but we are very pleased with our traffic and sales so far for this quarter.”

Walmart’s guidance for first quarter same-store sales envisions a range of flat to up 2%, and the fact that traffic and sales are pleasing to Holley is a positive development for the company and consistent with what other retailers who report results monthly experienced. For example, the 7% comps increase Target reported in February handily exceeded the company’s expectation for a 4% gain. Such discount apparel retailers as Ross and TJX both reported a 9% increase, Costco posted an 8% gain and Nordstrom came in slightly above 10%.

With Holley indicating Walmart is off to a solid start in February, it is conceivable Walmart’s U.S. stores could produce a comps increase at the upper end or in excess of the guidance range. If that were the case it would lend credence to the story of rebuilding momentum that has emerged over the course of the past year. Same-store sales turned positive in the third quarter of last year with a 1.3% increase and in the fourth quarter rose 1.5%. Those figures were achieved against easy prior year comparisons and contained some beneficial effects of food price inflation, but an increase is an increase and Walmart is enjoying some newfound momentum as Holley pointed out.

The biggest threat to that momentum is the wild card of gas prices and the impact further increase will have on consumer spending. Holley acknowledged that gas priced at $4 or $5 gallon is going to be a problem for the Walmart customers, but also indicated that expectations around gas prices tend to reset as people become accustomed to higher prices and budget accordingly.