Trying times for Sam’s Club

Same store sales and operating profits declined at Sam’s Club during the first quarter prompting president and CEO Rosalind Brewer to call the reporting period, “one of our more difficult quarters.”

Sam’s total sales, excluding fuel, increased 0.5% to $12.2 billion while same store sales, excluding fuel, declined 0.5%, compared to a prior year increase of 0.2%. Meanwhile, operating profits excluding the impact of fuel sales declined 1.4% to $477 million. In explaining the weakness, Brewer said the fiscal year started with several challenges for core members.

“The combination of severe weather and the reduction of public assistance represented an approximate 90 basis point impact to comp sales,” Brewer said. “In addition, Q1 was marked by a rapid acceleration in inflation, as cost inflation was approximately 160 basis points, compared to 30 basis points in Q4.”

Perhaps more disconcerting for Sam’s Club is that is chief rival experienced those same conditions, but managed to achieve solid same store sales growth on a base of stores that are already more productive than Sam’s. For example, Costco reported a 5% same store sales increase, excluding fuel during its second quarter period ended February 16. During the four week period ended March 2, comps increased 4%. Costco’s U.S. comps excluding gas increased 6% during the period ended April 6 and increased 5% during the period ended May 4.

And Sam’s isn’t haven’t an easier go of things in Mexico where Walmart International division president and CEO David Cheesewright said Sam’s accounts for 26% of Mexican operations and is performing below expectations.

“The team is focused on reinvigorating our value proposition by providing an exciting assortment through treasure hunt and differentiated merchandise for our Advantage members, and by adding additional value for business members,” Cheesewright said. In addition, we’re leveraging best practices from our U.S. Sam’s Club business. While we’re confident about our long-term strategy, we expect Sam’s Club to be challenged in the near term.”

In the U.S., Brewer said merchants have been elevating the value and uniqueness of the merchandise assortment and seeing positive results in areas where newness has been introduced around themes of fresh, fast and fit. Within “fit”, Brewer said Sam’s new assortment of snacking options, which includes exclusive better for you choices, is helping to drive double-digit unit growth while on-trend “athleisure” active wear helped deliver a double-digit positive comp in ladies apparel.

“We’ve also enhanced our private label offering by introducing new, high quality items and consolidating the existing assortment into three main labels – Member’s Mark, Daily Chef and Simply Right,” Brewer said. “While our category level merchandising results this quarter were mixed, we remain confident in our strategy to deliver more newness, more often.”