Global growth for Wal-Mart profits in Q2
Supermarket chain Wal-Mart recorded a 4.5% year-on-year rise in net sales to US$113.5 billion during the second quarter, despite the negative impacts of currency fluctuations and difficult global economic conditions.
Wal-Mart Stores president Mike Duke was pleased with the earnings, with positive comparable sales in the company’s Walmart U.S., Walmart International and Sam’s Club divisions.
“Wal-mart U.S. continued its momentum this quarter, with comp sales growth of 2.2%. Ticket and traffic were positive and operating income grew faster than sales. Our Walmart U.S. business now has delivered positive comp sales for four consecutive quarters,” he said.
“There’s such a clear focus among the leadership team to drive the strategy of broad assortment and price leadership. We continue to win back customers and attract new ones. We will not let up on our passion to reduce operating expenses so that we can invest in lower prices.
“For today’s customers, the paycheck cycle remains pronounced in the United States and in our international markets. Given the continuing economic pressures, we believe that our price leadership and value are growing in importance to customers across all income levels.”
Walmart U.S. – accounting for around 59% of the business – registered a 3.8% rise to US$67.36 billion, while Sam’s Club had the same growth rate hitting US$14.1 billion.
Walmart U.S. CEO Bill Simon said the division’s comparable sales traffic increase was equivalent to serving 80,000 additional customers every day during the period.
Wal-Mart International continues to show strength with a growth rate of 6.4% year-on-year for the quarter, reaching US$32 billion in net sales.
“Every market delivered positive comps, and I’m pleased that our largest markets – the U.K., Mexico and Canada – collectively delivered stable growth, solid margins and expense leverage, despite challenging environments,” said Walmart International CEO Doug McMillon.
“The U.K.’s gross profit rate has increased slightly from last year due to strong inventory control in non-food merchandise. Second quarter expenses grew slower than sales, as ASDA continues to develop sustainable efficiency savings through process improvements.
“Walmart Canada had good sales growth and operating income increased compared to last year’s results. Net sales grew 3.8% in the second quarter.”
He said food and consumables were part of Walmart Canada’s strong comparative sales growth, while the company would be opening its first “Zellers to Walmart” conversions in the country this month as part of the largest expansion it has ever had in that market.
Mexican business Walmex notched a 10% jump in consolidated net sales, while McMillon highlighted wind farms were now supplying almost 60% of the energy needs in 348 stores in Mexico.
“By buying power at a set rate, we lower energy costs and mitigate cost fluctuations,” he said.
In Latin America in general, he said inventory days on hand were higher than the company would like, but trends were improving.
“In Central America, overall sales increased 6.5%, and comp sales were up 0.4% on a constant currency basis.
“Brazil grew sales in the second quarter, but had a slight operating loss for the quarter.”
He said the international business had momentum and was prioritizing improvements in Brazil and China to position for success “for many years to come”.
Walmart China’s net sales grew by 10.% year-on-year while comparable store growth stood at 5%. Earlier this year the company decided to moderate its growth in China to avoid having stores with difficult configurations or that were located on too many levels.
“We want all of our new stores in China to exceed customer expectations.”
Elsewhere in Asia, results were particularly positive in Japan with net sales growth of 2%.
“According to statistics released by the Japanese Ministry of Economy, Trade and Industry, or METI, overall supermarket comparable sales for the second quarter declined by 1.9% from last year, indicating that Walmart Japan continues to outperform the market.”
In the 2013 financial year the company expects international square footage growth to be 21-23 million square feet, which is less than previously announced due to more moderate growth in China and changes in construction processes in Mexico.
McMillon was also upbeat about the company’s opportunities through its acquisition of Massmart in South Africa.
“For the 12 months ended June 24, 2012, Massmart’s total sales grew 15.5% and comparable sales grew 9.6% versus the same period in 2011.
“We continue to be excited about the opportunities to share best practices and expertise with Massmart.”